Planning Sustainable Transport by Hutton Barry;

Author:Hutton, Barry;
Language: eng
Format: epub
Publisher: Taylor & Francis Group

Marginal and average cost theory

Ensuring that transport works with maximum efficiency with objectives being attained at acceptable cost needs the application of some theory. Fixed costs have to be paid as standing charges and are independent of the amount of work done. Variable costs are pro-rata with the output. However, the distinction is not tidy and mutually exclusive: in the end, nearly all fixed costs can be made variable to some extent or another. Staff costs are awkward: employees cannot be easily laid off at slack periods and, for the short term at least, are effectively fixed but in the long term staff numbers may be adjusted by shedding or recruiting staff.

Figure 14.1 shows the estimated aggregate cost of running a 17-tonne two-axle truck as in Figure 10.5. The wage costs have been inflated to £25 per hour to cover management costs, insurance, sick-days and holidays, etc. The personal working year has been assumed to be 2400 hours (300 working days at eight hours per day). The working year of the truck assumes a mean speed of 55 km/h. Total wage costs to cover the truck working year are weighted by the ratio between the truck and personal working years: where the truck works more than the personal year of 2400 hours, the age bill is increased to cover overtime and/or extra staff; where it is less, the wage bill is reduced on the assumption that staff will be deployed on other work. The wage bill in this case has been made into a variable cost. The dotted total cost curve is the simple sum of the solid fixed cost and dashed variable cost curves.

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