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Thread: Fixed Costs vs Variable Costs...

  1. #1
    sjmay is offline Member
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    Default Fixed Costs vs Variable Costs...

    Hey guys,

    Just doing some more research, and I ran into an article mentioning fixed costs (costs that you would incur even if your truck did not run) vs variable costs (costs to move your truck)

    Wanted to make sure I am not missing anything,

    Fixed costs would be the following:

    Truck Note
    Trailer Note
    Insurance
    Licensing
    Your Salary (for owner/operator, I am assuming how much each month you need to clear for your personal bills, ie, (mortgage, bills, etc)

    Variable Costs would be the following:

    Fuel
    Repairs under $500
    Repairs over $500
    Special Permits
    Tolls
    Labor

    etc,

    Am I missing anything in there? I probably am, just not sure what..

    Thanks,

    Sam

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  3. #2
    Maniac's Avatar
    Maniac is offline Senior Board Member
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    That pretty much covers it

  4. #3
    rank is offline Senior Board Member
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    Other fixed costs are cell phone, load board fees, accident insurance (some sort of lost income protection deal so you don't lose your truck of you get hurt while you are self employed).......oh yeah......and chrome

  5. #4
    sjmay is offline Member
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    Quote Originally Posted by rank View Post
    Other fixed costs are cell phone, load board fees, accident insurance (some sort of lost income protection deal so you don't lose your truck of you get hurt while you are self employed).......oh yeah......and chrome
    LOL well I have insurance there as a whole, I guess it can be broken down into sub groups, cell phone, would that be fixed or variable, I suppose it would depend on the plan etc,

  6. #5
    repete's Avatar
    repete is offline Senior Board Member
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    I would move the driver pay from fixed to variable, it can easily change from week to week and when times get tough you can go without pay but the truck aint gonna move with out fuel!

  7. #6
    GMAN's Avatar
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    I am a little confused about a couple of items. You have driver pay or salary under fixed costs, but labor under variable. I don't know what labor costs you would have other than driver pay unless you plan on hiring a driver rather than driving yourself. If you pay yourself a fixed amount of money as a salary, it would probably be best to put it under fixed costs. If you pay yourself a percentage of the load or mileage it would be more accurate to put it under variable expenses.

  8. #7
    rank is offline Senior Board Member
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    Quote Originally Posted by sjmay View Post
    LOL well I have insurance there as a whole, I guess it can be broken down into sub groups.....
    I understood insurance to be truck and cargo. I'm talking about some sort of insurance to cover your lost income in the event you are unable to work for a while. if you break your ankle you could lose your truck.

  9. #8
    sjmay is offline Member
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    Quote Originally Posted by GMAN View Post
    I am a little confused about a couple of items. You have driver pay or salary under fixed costs, but labor under variable. I don't know what labor costs you would have other than driver pay unless you plan on hiring a driver rather than driving yourself. If you pay yourself a fixed amount of money as a salary, it would probably be best to put it under fixed costs. If you pay yourself a percentage of the load or mileage it would be more accurate to put it under variable expenses.
    By putting labor under variable, I meant stuff like lumping, unloading etc, but after thinking about it, that should be added onto the price per trip etc, ie, if you quote a run at $3000 base price, then you would add on for tarping, unloading, etc

    As far as driver pay, I put that under fixed because no matter how he gets paid, the driver HAS to make a certain amount to "break even" as far as his personal bills, ie, rent, food, bills, etc, just like in any other job, there is a certain amount you have to make just to cover expenses.

    As far as insurance rank, yea, I can see that insurance as solid advice too, I would add that in under a fixed cost too.

  10. #9
    GMAN's Avatar
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    Quote Originally Posted by sjmay View Post
    By putting labor under variable, I meant stuff like lumping, unloading etc, but after thinking about it, that should be added onto the price per trip etc, ie, if you quote a run at $3000 base price, then you would add on for tarping, unloading, etc

    As far as driver pay, I put that under fixed because no matter how he gets paid, the driver HAS to make a certain amount to "break even" as far as his personal bills, ie, rent, food, bills, etc, just like in any other job, there is a certain amount you have to make just to cover expenses.

    Unless you pay a driver a fixed amount each week, then it is a variable expense. In other words, if you pay a driver $500/week no matter how many miles he runs then it is a fixed expense. Fixed expenses are costs that remain constant no matter what else happens. If the truck moves or sits, fixed expenses go on.

    A driver may have a certain amount of expenses, but it isn't up to the employer to supplement the driver unless he is producing. When drivers work mileage or percentage their pay can and does vary from one week to another. It can depend on the economy, freight availability and when he gets his paperwork into the company. Most of carriers don't pay the driver until they receive the paperwork. It is the only proof the company has that the work was performed. Drivers typically will average about 2,500-2,700 miles per week in an average economy. During slow times of the year a driver may only get 1,500-2,200 miles per week. During the good times of year he could drive 3,000-3,500 miles per week. His travel lanes could also impact the number of miles that he runs. It isn't up to the employer to pay the driver a minimum amount of money each week when the driver is paid by the mile or percentage. I don't know of any carriers who pay a minimum amount of money each week unless they pay a salary. Most carriers don't operate that way. If it is your business and you hire a driver you can pay them any way you choose. Most carriers will attempt to work with drivers to provide as much consistency with pay as possible.

  11. #10
    wrongwayTommy is offline Rookie
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    Sam
    thats good,and needs to be done,but I have to take it a little bit further
    here is what I had to do to keep up with everything and to see my bills got paid on time because I had so much going on,a few bills got forgotten and I had a few late charges.

    My wife had to come onboard to help me

    she has a 5 subject composition notebook

    each section has a reason

    1st section are our monthly bills that are paid during the current month,including some bills are weekly bills like fuel.We list due date,amount,etc-we check off each bill when we pay it.They included fixed vs variable
    2nd section is our qtrly bills,like our fuel taxes,state tax deposits,etc
    3rd section is our annual bills like tag,county tax,form 2290,accountant,etc

    in the note book,we also list how each bill is paid,whether by check,online or a auto deduction from checking account-we do this as a reminder
    and to not be late on any bill.So far,we pay early and our credit is fine,and we have not incured any late charges.We also have a record of past bills as to when and how they was paid if we need them.
    This written log helps us to look back over the past few months or years to see how much we average on any given month so we can project this month or next
    months bills.It also helps me see where I may be able to save money if a bill seems to be too high constantly.
    It shows us where our money goes and whats coming up, how much and when.


    I have also developed a simple trip sheet I use on the road to keep up with everything I spend on the road,miles in each state,and fuel or other expenses,etc.
    Every week when I get home,we go over it all and keep a close eye on the companies finances.I also include what the load is and ho much it pays.

    since we started this system,my finances have gotten better,and my company has prospered.
    My wife and I have gotten along better too
    Last edited by wrongwayTommy; 03-27-2011 at 05:23 AM.

  12. #11
    wrongwayTommy is offline Rookie
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    Sam,I would like to add that I fill out a monthly and qtrly recap of each month,listing each expense and it shows me all expenses,and income
    when I tally it up,I see how much my small company made that month,altogether,this system saves us money and keeps us on top of things.

    I think you are on the right track,and you will probably develop a system that works for you.
    I believe a lot of o/o`s fail because of their neglect of the business end of trucking-good luck Sam

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