THE COST OF OPERATION AND ECONOMIC LIFE OF MOTOR TRUCKS 260055
In order to flourish, business must operate at a profit. As the margin of profit is daily becoming smaller, costs must be analyzed so that economies can be effected. As a lack of uniformity exists in the methods of arriving at the cost of operation, a brief outline is given of the items that enter into the totals from which operating costs are calculated and also of what constitutes the economic life of a motor vehicle.
Selection of the correct type and size of vehicle is of paramount importance; and standardization of the various makes will result in better operation, more efficient inspection, and more economical repair and upkeep. Having then determined the cost of operation of a vehicle, a decision must be made as to the basis on which its economic life can be computed.
The items said to contribute to operating cost are drivers' wages; gasoline and lubrication expense; repairs; tires; sundries, including taxes; license fees and insurance; depreciation; and miscellaneous charges, such as garage rent and the various items of overhead expense. Each of these factors is discussed in detail.
The economic life of the vehicle is dependent on the type and size of the unit, and the three principal causes of replacement: (a) physical depreciation, (b) unsuitability for the services for which it was purchased and (c) obsolescence. These factors are also given detailed consideration.
Charts show graphically the results derived from the operation of a cheap type of automobile over a 5-year period; the logical time for trading-in an old car for a new one; the cost of operation of 2-ton trucks over a period of 7 years; the annual replacement-cost and the average annual maintenance-ccst over the same period; and the average prices of the automobile and the cost of gasoline, oil and tires for the same period, to furnish a basis of comparison between the price of the commodity and the cost of operation.
The conclusion reached is that, although any truck built by a reputable company will have an economic life of at least 8 or 10 years, it is essential in each case to take into consideration the conditions under which the truck operates; consequently, a rule that will govern all cases is difficult to derive.