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1) by and large, stuff wears out by the mile. The more you drive, the more it costs. These are the variable costs we're talking about and I think we pretty much agree on this.
Yes. Variable costs should be calculated by the mile.Originally Posted by rank
I like to use mileage to calculate all my costs because;1) by and large, stuff wears out by the mile. The more you drive, the more it costs. These are the variable costs we're talking about and I think we pretty much agree on this.
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2) even with fixed costs I express them by the mile because (in our operation, having our own outbound) we pretty much run the same miles every year anyway, so it really doesn't matter in my case.
My opinion is you are the exception to the rule. Even 20,000 miles per year difference in mileage will severely throw all your cost projections off if you are calculating fixed costs by the mile.2) even with fixed costs I express them by the mile because (in our operation, having our own outbound) we pretty much run the same miles every year anyway, so it really doesn't matter in my case.
Example: Let's say your costs last year were $50,000 fixed and $50,000 variable (and likely, they are much higher, but I'm using this figure to keep it simple). You calculate your cost per mile at 120,000 miles, which you ran last year. It cost you $0.83 per mile to run the truck. BUT, this year, you aren't running as many miles, and are on tap to run 100,000 miles instead of 120,000. If you simply cacluated by the $0.83 per mile you ran last year, you would calculate your yearly costs as $83,000. But, in reality, your fixed costs for the year remain at $50,000, and your variable costs were really $41,667. Your cost projections are a whopping $8667 off for the year. That's a huge amount to be off on a projection, especially if you are basing your rates off that $0.83 per mile projection.
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I multiply extra miles by my cpm of $1.65 and that's my extra cost to pull that load. Then I'll tack on $500/day profit expectation and that's my minimum.
You are definately doing it a good way then, as you are calculating profit per day above and beyond your cost per mile.I multiply extra miles by my cpm of $1.65 and that's my extra cost to pull that load. Then I'll tack on $500/day profit expectation and that's my minimum.
My current costs run about $0.80 per mile variable, and $271 per day fixed.