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DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized
Report No. 472
FILL UmP Public Disclosure Authorized
RAILWAY TRAFFIC COSTING Public Disclosure Authorized
April 1974 Public Disclosure Authorized
Transportation Projects Department (CPS) Prepared by: Frederick Sander, Consultant
IThis report may not be published nor may it be quoted as representing the views of the Bank Group. The Bank Group does not accept responsibility for the accuracy or completeness of the report. Pro-forma Analysis of Operating Expenses 109
J, r'o,'n for Separation of Mainline Locomouive Cre- Expenses Between Services 115
R, FrmulUa for Separation o' Mainline Locooio e ?uel E.xoenses Between Services 117
.In'rest Charges on Capital 118
Freight Traffic Unit Costs 119
Fo.F(orula for Calculating Carload Shunting and Marshaling Costs 120
1. nalysis of Freight Traffic Unit Costs - An Aczual Case 124
.J. Er?y R-eturn Haulage C astsxnd Com,modity Costs from Average Round-Trip Costs 125
K. Freight Traffic Cost Sheet for Carload Traffic ,28
L. F'reight Traffic Cost Sheet for Trainload Traffic 130
Freight Traffic Cost Sheet for Calculation of Long-Run Variable Cost at, Varying Lengths of Haul 132
N. Pro Forma Separation of Costs of Passenger, Mail and Express Traffic 133
0. Analysis of Long-Thrn Variable Costs for a Railway - An Actual Case, 1971 136 Chapter I
INTRODUCTION
A. THE NEED FOR AND PURPOSE OF TRAFFIC COSTING
1.01 It is axiomatic that accurate knowledge Cf production costs is essential for the success of any enterprise and that in the face of intense competition any enterprise lacking such knowledge will find it extremely difficult to survive.
1.02 The objective of costing is to provide data essential for a wide field of management decision, and, particularly in the case of state-owned railways, for the formulation of national policy in the transport field. In summary, the principal purposes of costing are:
(i) Setting of realistic prices (rate-making).
(ii) To provide data for profit analysis of existing and potential business, which in the case of a railway will include not only rates and fares but also line, station, and service profitability.
(iii) Cost control.
(iv) To permit evaluation of economies to be secured from operating and technological changes.
(v) To provide data needed for comparison of costs between the different transport modes required in the con- sideration of alternatives.
(vi) To provide data for evaluation of further capital investment.
1.03 The primary objective of railway construction in the under- developed areas of the world was to stimulate economic growth and to generate for the railway as much traffic as possible. To achieve this end, export commodities, products of agriculture, and other items of domestic production were often carried at very low rates, whereas higher-valued imports and other desirable but less essential goods were charged at higher rates. The intent of these policies was in the early days of development generally fully justified by tne results achieved, viz., the stimulation and development of productive capacity in areas remote from centers of consumption or overseas markets.
1 1.C4 The principal guide for setting rates was the old basic Dr4nciDle of "charging what the traffic w-ll bear." Rates established in accordance with this principle, except by coincidence, bore little re'ation to the actual cost of transport. As long as railways were able to operate in monopolistic or quasi;-monopolistic conditions they continued in practically all cases to charge on this value-of-service basis rather than a cost-of-servicz basis, and in certain cases where competition from other modes of tr.ansport has not developed o- is restrictively controlled by Goverrment decree, they continue to do so. However, in most countries the emergence of competion from other trans- port modes, particularly from. the roads, over progressively increasing distances, has forced the railways to adjust tariffs closer to a cost- of-service basis.
1.05 Unfortunately rmany railways have not yet established a costing system, and their rates therefore may not be set so as to atract all the traffic that the rail-ay can carry at lowest cost, or may not fully compensate in areas of high railway costs. The economics of rai and road transport are ver-y different. For freight traffic the ra.-ilway is best suited to the movement of large volumes over long distanoes. It cannot compete with the roads for small quantities of traffic or where the distance is so short that its lower line-haul costs cannot offset its higher terminal costs. WiTithout a rate structure related to costs it is likely that the railway will continue to handle traffic that could be carried more cheaply by road, while traffic that could more economically be carried by rail is moving by road. In both cases the railway loses, but more importantly there may be duplication of investment in the transport sector, which is undesirable in countries w,jhere investnent funds are a very scarce resource. For passengers, essential services are provided by the railway in many urban areas, although usually at the cost of large investment in equipment, much of which is underutilized except at peak periods; for long-distance travel, trains are generally too slow to compete witlh air travel at\higher-class fares, and although, by comparison with road transport they miay have distinct advantages of safety and comfort, rail service is usua.lly able Lo compete only at low fares because of the higher frequency and speed of road service. In many countries railway managements allege that passenger services operate at a loss, but rarely can the allegation be proved oy facts and figures.
1.06 For these reasons, which are related to items (i) and (v) in-para. 1.02, it is clear that an adequate traffic costing system should be maintained or developed. In addition the evaluation of further capital investment is particularly important, ar.d this cannot be done without sound costing infonmation. The same infornation is essential for the identification and evaluation of losses, if any, that may be incurred on particular sections, stations, or services, or of the benefits
2 that may accrue from changes in cperatLag and technical methods. .Vinally, adequate control of expense is not possible unless -t is closely integrated with an adequate system of cost determination. A knowledge of costs is essential to a wide range of managerial decision, and a sound costing organization should be an indispensable element of the administrative structure.
B. HIS'ORIC CO6T
1.07 It should be emphasized that future costs are the only meaningful costs f'or purposes of pricing, investment evaLuatioln, or other decisions affecting the progress of thre railways. However, in order to determine what future costs are likely to be, it is necessary to begin by analyzing past costs on the basis of the mosti recent account- ing and statistical records.
1.08 Every element of administrative, operating, repair, and maintenance expense should be studied, first to determLine whether the e*nense incurred in the accounting period was normal. For- ex n_e, did it include extraordinary costs for overtaking deferred maintenance, or wages of staff made redundant by technological change but kept in employnent in anticipation of increasing traffic? Conversely, was work- shop and other repair output adequa.te to maintain the plant and equipment in good condition at existing levels of operation?
1.09 It will then be necessary to consider the degree of vani- nbility of each element of expense in response to changes in traffic levels. This is a subject that is considered in detail in tne following sections, but here it is necessary to point out that a close relation e:ists between expense variabilituy and the existing and potential capa- city and utilization of the railway's plant and ecuipment. To make possible a realistic projection of future costs the present level of utilization of track, yards, locomotives, cars, workshops, running sheds, and other plant should be related to their potential capacity, as expressed in terms of repair output, train-km, net ton-km, or other relevant measurement. With these data it will then be possible to proceed to the assessment of future costs.
1.10 The value of historic costs will depend not only on the speed and promptness with which the accounts are made available but also to a greater degree on the consistency of the primary classification of expense with the data required by the cost office. It is too often the case that, in the interests of simplicity and economy, expenses are lumped into broad accounting descriptions that were not designed with: costing in mind. To take an example, many railways maintain a single expense classification for Maintenance of Permanent Way, which includes no't only running and yard track maintenance, but also repairs to the slopes of bawnks and cuttings, drainage, bush and grass clearance, and
3 .ree felling. The costs of maiLntaining tihe track are determsined to some ext:ent by weatcher and tiime but more significantly by physical wear and '-.emnent caused by the passage of trains. A degree of cost variability relaLlve to the volume of traf'ic car the:-e'fore De shown. The costs of otheD.e :-!ork mentioned above are due entirely to weather and time and c7rn be considered as fixec at any level of traft-fc. Yet in rarlj areas, narticularly in tropical rain forest, TIey co,.prs e the greate- part of a;aiLntenance of Permanent a,ay costs. Fuor cos g purposes, therefore, it is necessary to differentiate between track maintenance and maintexi- ance of the remainder of the right of way. A revrised form o" CLassi.Vication of Operating Erpense that will give a more -.meaningfui breakdowun of costs in this and other context is -proposed in apnedix A. Cenerally it is found that, existing classifications do not provide this amount of detail, but experience has sho,mr that sufficient background information can usually be extracted from satistics and establisnhment lists to enable reasonably accurate cosL data to oe determined. The process may be time-consuming. Appendix A proposes a method of reducing the amount of this supp'lementary accounting analysis. The suggested format should of coursa be r-efined and adapted to suiu local needs.
C. FUT rI.Pp4 COSTS
1.11 After thus analyzing the normal expenses incurred during the nOeVious accounting period and their degree of variability in response to charges in traffic 'evels, it next becomes necessaxy to translate them into future costs, after 6etermining:
(i) Traffic forecasts for, say, the next five years.
(ii) Potential capacity and present utilization of plant and equipment.
(iii) Projected technological and operational changes.
(iv) Probable changes in wage and price levels.
(v) Economics of projected renewal and rehabilitation programs.
12),'.hcduzed to the very simplest terms, if it should be possible !;Woh:inKIe the traffic forecast within the capacity of existing plant and eouLpment, if wages and orlces were expected to be completely stable and ito cechrnoogical iTrmrovements were to oe foreseen, then variable expenses _ uo, incre.--se proportionately to traffic growth while fixed expernses would remain unchanged. In other words the variable cost per unit of output would remain the same while fixed expenses would be spread over more units and the total cost per unit would be proportionately reduced.
1.13 Such an excessively simplified state of affairs is never likely to occur. Whereas many rail'ways may find that4 capacity of the track and structures is ample to cone with the g-owth of traffic in the foreseeable future, it is rost likely that, if t1he g:-outh rate is reasonably healthy, some additional locomotives. rolling stioc), and plant will be called for, while some existing equipment will no doubt need to be replaced. The new locomotives and rolling stock, whether additions or replacements, will almost certainly be more efficient and of greater capacity than the oldest or the average units of the existing fleet. The average trainload may therefore be expected to increase, and conseouently the projected increase in locomotive and train-Iaa will be less than pro- Dortionate to the forecast increase in traffic0 In certain cases it may well be that the additional traffic can be handled with no incnease or everl a decrease in train-km. In these circumstances many elements of expense that might normally be considered to be variable costs aill remain static during the period of the traffic projection. Thev becoiae, in effect, capacity costs, i.e., the cost of purchasing capacity to move traffic whether or not that traffic is actually moved. Up to the limit of their capacity they are neither truly fixed costs nor direct'ly variable costs. In the specific case in question they will include workshop, running shed, locomotive, and train crew expenses.
1.14 To secure the benefits described in the previous paragraph it may be necessary to undertake substantial investnent, e.g., lengthening crossing loops to accommodate longer trains even though line capacity may be otherwise sufficient to handle the traffic projection. Drawgear on existing stock may require strengthening. Interest and depreciation on this investment, and on any other additional investment that may be necessary, will become an element of future costs.
1.15 The benefits likely to be derived from any technological improvement, such as the introduction of more efficient forms of traction, mechanical track maintenance, Central Traffic Control, etc., should be carefully and realistically assessed, either from comparative historic costs, if available, or from reliable estimates prepared by technical officers. Similar attention should be given to possible savings in repair expense that might be expected to result from replacement of old assets by new, even where no operating or technical improvement may otherwise accrue.
1.16 WJhatever reduction in expense mav be secured from improved technology, it is necessary also to look at the other side of the equation and consider what changes are likely to take place in the levels of wages and other staff costs, and of material prices. For tnis purpose, a stuady should be made of past trends, over a period p2 at least 7 years, first Wa:-.es and salaries, and then of other staff' and social secuLrity costs. r.- average annual emolaments and other costs per man employed should be -~o.?-.rc with the trend of the consux;er p-rice index during the period. is often found that real wages and sala-ies have increased aT; a reason- ao':y steady pace arnd that there is a corre'ation beteer salaries and .;i-es on the o%ie hand and other staff cosAs, including retireeant and socil'. secuai=t benefits on the other, exceDt, of cou-rse, ;ae:re new -rules nr le-islation may have altered the bases of calculation of' the latter. For the future, a projection of the .ossible trend of consu-mer prices (which usually reflects the inflationary -rend) is gener-ally a usefu_ starting point for assessment of prospective wage levels. This ard any other 'Imown local factors, such as policy of either allowin- increases in wages in real terms or of limiting increa.,3es, should be kept in1 view and future wage levels, etc., posvulated. In the case of .material prices the Purchasing or Stores Department should be able to advise the trend of prices of major classes of consurable materials and give a considered opinion of future prospects. Reference should also be made to nationally maintained price indices.
D. VAI3CYING LFEVEL OF CAT
1.17 It is a misconception -to assume tnat on any railway there is a single cost of movinc a ton of freight or a passenger over a specific distance. It is of course a simple process to divide total cost by total traffic and so produce a cost per traffic unit, but this is nothing more than a statistical presentation of accounting history. The resultant figure is not likely to be valid for the future or for any specific traffic except a negligible minority that approximates in all characteristics to the average. In an industry so complex as a railway an average fully distributed cost has little value, except possibly as a statistical index of trend. The varied objectives of cost determination have been summarized in para. 1.02. Each of these will involve a different concapt of cost. 1.18 The cost characteristics of railway operation show a.ratio of fixed to variable cost that is higher than for other modes of trans- portation except pipelines. Fixed costs are those which do not change in magnitude when the quantity of output varies. It is therefore im- rossible to assign any specific portion of these costs to a particular unit of output, e.g., a particular ton-km of traffic. Rather, fixed costs must be imputed to the entire supply of the type or types of service with which they are associated. Any attempt to apportion them nmong particular services or commodi ty movements in order to produce full (i.e., "fully distributed" .or "fully allocated") costs must of. neces ity be arbitrary. It falsely assumes that all costs carn be traced 1 prnrticular kinds or quantities of output and can rationally enter directly in-o pricing decisions. The guide for setting a "minimum" orice ter any railway service should rather be the relevanrt, variable cost of
6 providing the service. The produzt of all prices must, if trhe railway is to reria-.n viable, exceed variable costs by a .argin sufficient to ccier fixed costs, but it is essential that t'he burdern of fixea costs should be spread over as large a vol'Ume of traf-ic as can be developed zith attractive rates in excess of the relevant variab_e costs.
1.19 Other elements of' railway cost, refe^red tG as 'capacity ccsts," are costs of providing capaciLy of one kTind or another in excess of present utilization and may be considered -to be tempo rarily fixed until such time as that specific capacity is absorbed by increas- ing traffic. It is clear therefore that the cost of movLng an additional ton, or car, or train will be substantially lower tharn the average full cost of moving similar units of existing traffic. The first obZective of costing -would be to determine prospective variable costs, either in the short run or in the long run. The definition of these ter-s, and their significance, particularly in the field of rate-making, will be discussed later.
1.20) The financial advisability of abandoning or curtai_ng railway lines, stations, or services is a subject of increasinglY frecuent discussion at present. In this context the costing offLicer is concerned with avoidable, i.e., decremental, costs that, accorcing tc the circumstances surrounding the problem, may be less than 'cng- rin variable cost and in extreme cases may be no greater than short-run variable cost. The discontinuation of one passenger train out of several on a particular line is, for example, unlikely to result in a proportionate reduction in station staff, permanent way labor, signalmen, or terminal shunting costs on the line over which the train has previously operated. The savings in fact will probably be no more than the direct running ccsts of the train, plus repair material for the locomotive and rolling stock. The number of maintenance staff employed in workshops and - rwnning sheds is not likely to be affected by the withdrawal of one train from service. If, however, all passer;ger trains are withdrawn from a particular section or a large number of trains are withdrawn on a selective basis throughout the system some saving in station and repair staff costs and track maintenance and depreciation will accrue. If the ultimate decision is made to discontinue all services on a particular line, it should be possible, in the absence of external constraints, to avoid all costs, fixed and variable, of operating that line. It is most likely, however, that constraints will exists to delay realization of total savings. For example, it may not be in the interest of the r'ailway or the nation to lay cff skilled railway workers, whose services must therefore be retained for a time until they can be absorbed in alterniative work created by normal staff attrition or increased operating ;ictivity. Total savings will ultimately be achieved, and the time- ph;ising of their realization should be assessed.
1.21 For the other purposes of costing summarized in para. 1.02, long-run variable costs wil1 generally be appropriate, and the definition and method of assessment of such costs will next be considered. E. SHORT-RUNF AND LONG-1RUN VARZIABLE COSrTS
1.2 2 Short-run variaable costs may be defined as costs associated w;.'th changes in traffic volume that, do not necessitate any change in the size or cost of the existirg plant wd equipment. Long-run variable cDsts are those associ.ated w-ith changes _n traffic volume that Lavolve changes In the cost and size ol' the plan- and equipmient. The expected rate o' sustained increase in tvhe level of traffic will normally have an important influence in deciding when capacity of trhe plan must be ex?panded, and the required investment must be recog.._zed in computing _onC-run costs.
1.23 Although for pricing purposes short-run variable cost is significant in special cases, such as ob-aining back-loading for empty cars or carloads for trains traditionally running underloaded (e.g., mixed passenger/freight trains rurning to public schedules), it should be resorted to generally only where flexibility in pricing exists.
l.2h AS a general rule the length of time over which long-rua costs should be projected and used as a guide for minnimUm pricinc, should be related to the expected duration of the proposed tariff cnanges. in cases where inflationary cost increases are frequent, adjustments of costs and prices would need to be made often, as necessary.
1.25 The purpose of determining long-run variable cost is to establish a minimum level below which (except in special cases where short-run cost may be relevant) no rate, fare, or other charge should be set or allowed to fall. It is a cost reference of uniaue importance as a guide in determining the specific rates that will provide the maximum contribution to fiXed costs and overhead. The margin above lcng-rur. variable cost that maximizes this contribution will depend on the price elasticity of demand, and this in large measure will be determired by the alternatives available to shippers. Where competition from other transport modes is severe, the greatest total contribution to fixed costs will for many conmodities and hauls result from a low unit margin above long-run variable cost and a large volume. Estimating the volume of traffic that might move at different levels of rates and the resultant effect on net revenue is a key aspect of pricing, a subject that is considered in Chapter IV.
F. ESTA¶ISHING A COSTING ORGANIZATION
1.26 In countries where the Bank operates, most railways maintain manufacturing and repair job costing in their mechanical and civil engineering workshops, but few have established traffic costing systems. prior to the advent of long-haul road competition railway rates were .Jflmost univerally based on the principle of charging "what the traffic will bear," and as long as revenues were sufficient to cover operating expenses and financial charges the determination of traffic costs was
8 generally regarded as an Lunnecessary refirnement. As competition has intensified, rates have been reduced extemporarily, first on one high- rated commodity, then on another, in anticipation of competitive encroachment or, more frequently, to try to regain traffic already lost. Rates in the lower scales hAtve usually remained unchanged, and on some railways, it is likely that a significant number a-e below long-run variable cost or are making a negligi'ble contribution to fixed costs, although they may include comrmodities representing a large proportion of total railway freight traffic.
1.27 Management has in many cases been reluctant to institute any new activity, including the establishment of a traffic costing system, that would tend to increase expenditure at a time of financial stringency. Traditionally, of course, costs have not been found essential, and in some cases a belief still persists that what was done successfully in the past can be made to work equally successfully in futare. Those very members of the staff who shouild best be able to informL management of the value of costs are possibly inhibited from doing so by unjustified fears of the intricacy of the oroblem and an apparent shortage of staff with sufficient expertise to handle it. Such trepidation is largely unjustified; on practically every railway there are staff capable of establishing a costing system, with, in sole cases, advice and guidance of experts from other railways that h ve developed sophisticated costing systems.
1.28 Certainly the costing of every phase of railway opera-ion on every section, at every station and for every cornodity movementt wi.11 require a costing system of great detail and intricacy. Such detail is, however, relevant only to the setting of special rates for specific movements for specific customers. For many railways the most urgent need is for a systemn of less sophistication that will make possible the assessment of costs in relation to existing tariffs and rates. This will show which rates may fail to cover long-run variable cost or to make an adequate contribution to fixed cost. When such a system has been established and the staff employed on it have appreciated all the problems involved, they should be able to introduce the refine- ments needed to subdivide the all-line costs by section, station, and train.
1.29 To establish the basic system, averages have to be used, but bhese will be averages that are specific for each type of operation. Ynrd marshaling costs per car handled, for example, will need to be calculated in the first instance on an all-line basis, as it is doubtful if any railway maintains separate costs, or an accurate record o-f car inovemenUs in each individual yard. The unit cost of marshaling in each yard may be expected to vary from the average, but in ordinary circu.ra- ::I;nces bhe variation should be insignificant in relation to the general cost structure. If in any yard it should be found that the' variation is ver.y great (and this will be ascertainabLe only from special studies
9 di.ring the later process of ref-.i-nement cof the costing system) then it l.y we'll be a matter for cost control to investigate3 rather than a a>;Jf -icat-onfor charging some customers more than others for the sa.e service.
1.30 7r the follow-ng chapte2s, guide_lnes are suggested for the es: abl 4.shme-t of a basic traffic costing system on these lines, This met,hodolo-r has been app'ied on a number of raIlways and has produeed useful comparisons of long-run variab'le costs with existing rates and revenues. I-t should, however, be mentioned that a mere routine comput.a- tcn o f costs using the details of the r.method indicated withoat. taking acctmr,t of the special featunes and circumstances of the particular railway is not recommended. For the implementation of the suggested melLhodclogy, except on railways operating very large and complex systerms, additionai staff requirements would be modest, say, one to three persons. is necessary that every railway should have a good cost accountiing oranizario,n staffed w.Tith capable people and placed organizationally so tha., they can work mosv effectively. Chapter II
DETEI0INA2ION Or' COS':c
A. METHOD OF APPROACH
2.021 Before beginning a traffic costing exercise it is advisable c,o decide wihether the railway system for which costs are to be determined can be treated as a single entity for purposes of extracting basic cost data on the basis of the characteristics of operation and equipment used being reasonably homogeneous throughout. On the majority of railways in the developing countries, where the track is laid to one gauge only, it will be found that costs may generally be extracted ia the first instrance on an all-line basis. Wnere, however, parts of the systemn were construciced or are used for specialized purposes, or are operated by specialized equipment, or are built to different gauges it nay be necessary to extract certain costs separately for different Darts of the system. To illustrate this point, an actual case may be cited. On this particular railway, part of the system is used almost exclusively for high-density mineral traffic, moving in heavy trainloads; track is standard gauge, and the major part of the traffic is hauled by electric traction. Most of the remainder of the system is standard gauge and diesel operated, almost equally divided between passenger and freight. There are also a number of 3-ft 6-in and meter-gauge branch lines with relatively light traffic. As far as available data permit, it is clearly advantageous in such a case to extract costs for three clearly demarcated operations separately. In the majority of cases less detail will be needed. In the following example, as illustrated in Appendix C, a railway of reasonably homogeneous charac- teristics is assumed. For comparison a pro forma cost analysis for the special case mentioned above is shown in Appendix 0.
2.02 Progressive stages in the determination of traffic costn are proposed as follows:
(i) Tne expenses of the most recent accounting period are to be separated between fixed, capacity, indirectly variable, and directly variable costs. (Directly variable costs are those which may be expected to vary in direct proportion to changes in traffic volume. Indirectly variable costs are those which will vary in some degree but less than proportionately to changes in traffic volume). For determining the variability
11 c: cer.ain expenses ana arrivinpg at a formula -6hat will best explain variability and provide more reliable projections, statistical correlatior. (e.g., regression rialysis) techniques m,ay be used. .n t>he followiing section, h-owever, a simle basis which can be easily adopTed boy most raihiays and gives genera2lly sat2sfacvor:y results is indicated. (This can oe r-1ined later, using the analytical ;.echniques r^eferred to, es-peciaMly where computers are available). The faczors used and the extent of variability indicated here are based on experience; further study/investigatior. and adaptation with reference to the particular circumstances of a railway are desirable.
(ii) Capacity and variable costs are to be separated betw;een freight and passenger services.
(iii) Freight costs, capacity and variable, are to be separated between line-haul and terminal costs. Line-haul costs shouldbe subdivided into track, train, locomotive, and car costs, anca terminal costs into documentation, handling, collection and delivery, transshipment, marshaling, terminal and intermediate shunting, and any other costs (e.g., port charges) that do not vary with lengtlh of haul.
(iv) Historic costs are to be translated into future costs, having- regard to the factors enumerated in paras. 1.08, 1.11 and 1.15.
(v) Future costs are to be translated into unit costs most appropriate to the measurement of the relevant activity (e.g., car, ton or train-km, car-day, net or gross ton-
(vi) Costs of specific services or transporting individual commodities are to be calculated and compared with revenue earned at existing rates.
12 B. THE COSTING SYSTEMIA-DKEAILED ANALYSIS OF Et-PElNSLS
Superintendence (All Departments)
2.03 TLhese expenses are indirectly variable. Experience has shown that there is a tendency for superintendence costs to rise as the volume o, work increases, but the rate of increase should be much less than directly proportionate to changes in the volume of traffic. Muchl will depend on the range of officer grades encompassed within the meaning of "Superintendence," which varies widely as between one railway and another. Where the accounting rules follow the Uniform System of Accounts prescribed by the Interstate Commerce Cornrission (ICC) of the US, superintendence includes all officers from the grade of departmental chief to general foreman and inspector, together with their clerks and other office employees. Other railways consider superintendence to comprise only the departmental head, his tmmediate assistants in charge of the overall activities of the department, and officers in headquarters, such as architects, draftsmen, and research and personnel officers, together with the clerks and other employees directly supervised by such officers. In the latter case, foremen, inspectors, shop clerks, timekeepers, etc. are excluded from "super- intendence," ana their salaries are charged to the respective direct heads of expense, e.g., locomotive, freight-car or passenger-car workshop repairs, engine-house (running shed) maintenance of locomo- tives, track maintenance, etc.
2.04 Under this more restrictive concept of superintendence it is reasonable to assume that, within the limits of possible traffic increase over a comparatively short period of time, cost will not significantly increase. Where, however, superintendence as defined includes grades such as foremen, master mechanics, and inspectors it will be necessary to analyze costs to determine the relative propor- tions of fixed and variable cost comprised in the total expense under this head. This will probably require reference to staff schedules or payrolls and the segregation of fixed and variable expense according to the grade and nature of duties of the men employed. It may be assumed that salaries and other costs of inspectors, foremen, and master mechanics will have the same cost variability as the main labor force employed on the specific activity involved.
2.05 The variability of superintendence expenses will be greater in some departments than in others. Where, for example, accounts and personnel records are maintained manually the number of staff and re- sultant costs of these departments are likely to react in greater degree to increased output than those of, say, the Civil Engineering Department.
13 -Rst trends should be studied and regression analyses made to determnine -unzi- of oucut (e.g., train--m,, consignrents, tons or ton-! 2 C06 Experience indicates that superintendence costs as a whole are unlikely to vary more than 10 percent with varying traific volume, exr,essed in traffic units (ton-kon plus passenger-km) or train-kIn, .idthat the variable best explaining superintendence expense is train- km . Yainte-ance of Way and Structures--General Comment .~7 TIe allocatio- of civi]. engineering maintenance costs gives -r,e to some of the more difficult problems in railway traffic costing, i`rst in deciding the degree of cost variability in relation to changing -raffic levels and second in assigning the respective proportions of cc;st tLo freight and passenger service. c.08 Present consideration :s directed to a definition of fixed -ind va-iable cost, and in the following paragraphs it will be assumed hoat the railway under stidy has a sufficient reserve of track capacity, termns of train paths, to meet increasing traffic demands within the *oreseeable future. If this should not be so then substantial additional construction may be needed to increase capacity, by track doubling, -inproved communications, signals, and yard extensicns. In the latter case the addi-tional cost of operating and maintaining the new works, together with depreciation and interest charges on the new investnent, will need to be taken into account in assessing future traffic costs. (a) Pennanent Way Maintenance--Labor 2.09 The cost of permanent way labor varies with traffic volume but in considerably less than direct proportion. In the Western Hemis- phere most railways follow the method used in the US of dividing permanent way labor costs between (a) maintenance of the roadbed and earthworks and (b) track repairs and surfacing. The former might be considered as fixed cost and the latter as variable, although again it is almnost certain that variability will not be in direct proportion to :riffic volume. In rnany other parts of the world all permanent way l -'-or cost.s are included undera single head of expense. It is necessary -o establish for each such railway the cost on one hand of earthworks 114 m.-A.nta,ance, grass anrn weeud control, b,'-sh clearance1 ana other works derende.nt on C-irrlmate and the nassage cfvtime, and on the ote- heanQ t,he cost cf track maintenance, which will vary in some degree with .,r-ffic density and speed of trains. In most cases t1he only available meens of doing this will be to seek the considered opinion of experi- enced track maintenance officers as to the relative -rorortions o- the working day that track gangs spend oGr the track on the one hand and the roadbed and right of way on t'ne ot-h;er. On a railway irn jungle count-,>y, for e,cample, it was stated that the nornal pr^actice -was hat the mornings would be spent- on trac'.k, maintenance and the aftern.oorns on repairing formation, clearing site-drains , weeding and brush clearance, etc; in other words the ratio of indirectly variable cost to fixed costw-ould be approximately 2L/20 (allowing for 8 hours work e.-ch day Monday to Friday and 4 on Saturday). 2.10 It is next necessary to determine to what degree the cost 4 track maintenance is likely to vary in response tc traffi c charnges. . tudv o- this question would be desirable, to take account cf thne z!:rticular circumstances of the railway. On a large railway the degree S ccst. va-iability can be estimated by comparing track labor costs on . series O' sections of the line of comparable condi-tion, age, and rhVsical characteristics, but with varying traffic density, from the ].ightest to the heaviest. On a small railway this may not be possible or at best proride results of doubtful validity. In Mexico, where the rail network is extensive, a study showed that perm.anent way labor costs on lines of the lightest traffic density were not less than 5G0 percent ot sirmilar costs on the most intensively used lines, the figures -ndicating an approximately h0 percent variability relative tc tuhe a.verage traffic vo'ume at that time. In a study of costs on the Korean National Railways it was found that track maintenance costs varied in ratio of 3:2:1 among the most intensively used sections of the line, those of average density, and those of lightest traffic density. The comparable ratio of daily train density was 10:4:1, indicating that at hli.-hly interisive levels of utilization t}here is an approximately 334 percent variability of track costs relative to traffic density. In Canada, where extensive studies have been made, the variability of track maiatenance costs relative to increases in traffic dmsity was found to be be about 34 percent. 2.11 It would appear safe to assume in projections of probable ftLure costs that the labor cost of track maintenance will increase at no!, more than 1O percent of the rate of traffic growth. in this case 'ralfic growth is measured in terms of either train-km (on ra-ways w-here the relative speeds and axle-loading of freight and passenger trains are not materially different) or gross ton-km.> includirU h.cco- motive gross ton-km. Weighting for speed may or may not be done, as anrrears desirable under the prevailing circumstances of operaVicn. ALi assessment has to be made taking accGunt of the circumstances on the railwaay, the rate of growtth of traffic, etc. 2.12 On t-Uh majority of rai:.ways a problem will arise in dividing variable track maintenance costs between mainline rtunning tracks, i.ncludirg crossing loo-ps, and yard tracks i- depots and terminals. The 1CC ruIes o the 3USrecuire ',.at a ernses ci%arged to m;antLriance of way p.rmiary accounts s'iou-iLd seuaraue. betseer "ya_^d sirt;chr.g tracks," 'way Swi, tchLng tracks," aid ';rz-ini racks" and zhat all source doctne-ats should be nia-rkCed so as 'tC povide t^n-s separa-ion. Thsiis urifocunately a lrue that is far from universally applicablAe. In most cases recourse will be needed to the expert cpinion of t'he Chie-' Civil Lngineerh- and his officers to evolve a formula for ecuating kilomeuers of plairn track plus number of turnouts in yards to kilometers of' mainline track plus turnouts in crossLng stations. In a nuiber of' known cases the peraanent way instructions of the railway prescribe tne standard workload of a track gang in terms of mainline track or yard track plus turnouts. Assuming that the instructions are observed, Qhe relative numbers of men employed on, and hence the cost of, mainline and yard track maintenance should be readily ascertainable. The assets registers -will provide the details of tra;-,.k-ar and numbers of turnouts. 2.13 Variable track maintenarnce costs having thus been separated between mainline and yards, the mairnline cost will naxt ba separated between freight and passenger services on the basis of either train-Ian or gross ton-kn, according to whichever unit it has been decided to adopt for the purpose (para. 2.11). (b) Permanent tAay Maintenance--Rails 2.14 On railways where the decrease in value of track through wear and tear is accounted for by mvaking provision for depreciation (see para. 2.21) or by contributions to a Renewals Fund, tne only rails whose cost will be charged directly against revenue under the subhead for Rails will be those required for spot replacements on curves and in other localities where the wearing-out rate is substantially higher than the normal rate assumed for depreciation purposes. The cost of such spot replacenents should be considered as variable costs of mainline operation and should be separated between freight and passenger services on whatever basis may be adopted under para. 2.11. 2.15 On railways where no provision is made for depreciation, all rail renewals wil' be charged directly against revenue under this subhead. ln this case the expenditure under this subhead should be disregarded for costing purposes, and in its place use-depreciation should be substituted, as calculated in accordance with para. 2.23(i). 16 (c) Permanent Way Maintenance--Sleepers 2.16 The same principles apply as for rails. If spot replacements only are charged to this subbead the cost should be vraated as mainline variable cost and separated between services in the same mannar as for rails. If all sleeper renewals are charged to thlis sub1head the cost should be disregarded and replaced by use-depreciation as in para. 2.23 (ii). (d) Permanent Way Maintenance--Ballasb 2.17 This expense is more fully considered in para. 2.23(iii), in which it is proposed that ballast renewals should be treated as a fixed cost. (e) Permanent Way Maintenance--Other Track Material 2.18 This will include mainly rail and sleeper fastenings, such as clipE,, spikes, bolts, fishplates, and rail anchors. Exactly the same principles should be applied as for rails and sleepers. (f) Permanent Way Maintenance--Smal.l Tools and Supplies 2.19 It is logical to assume that the variability of cost under this subhead, and the separation of such variable cost between mainline and yards, and between passenger and freight service, will follow the same pattern as the wages and other costs of the labor who use the tools and supplies. In other words the proportionate allocation of labor costs detenmined under paras. 2.09 to 2.13 should be repeated here. (g) Permanent Way Maintenance--Track Machines 2.20 This subhead records the cost of repairing machines used for maintenance of the permanent way. The proportion of cost likely to vary in relation to traffic changes can logically be assuned to be the same as for track labor, as calculated in para. 2.11. Track machinery is un- likely to be employed in yards, and expenditure under this subhead may be treated as a mainline cost and separated between passenger and freight services as in para. 2.11. 17 (h) Dezreciation of Track 2 .21 iVost railway a&airinstrations make provision for the physical wear and tear of track, resulting, from use ad e:coosure to the elj-mrts, by charging against incomrie an arziual prov_szon. or daorecfatior.. Z.is is based so-metimr.es on historic ccst but mnore a6ua;ly orL CrLre-ant rolace- ment values, divided by the engnleers' assess.aent of Ife_i-e of t'ha track in yars, at existing tra`i c levels and unrder^:ea ng oJeratirLg conditions. Other administratiorns p-refer to uneaae a :*egriUar nmual prograni of track renewals and to charge the cost against Lnco.i3 as and when the renewals are made. For depr^eciation. tLare are uz; a l l es for revision of the anniual provision at prescribeda intearva s o ;ahe care of changing traffic volum.es and also inflation if dep^eciation is calculated on replacement cost. 2.22 Whatever method is used the objecTive is usually to equalize inscfar as -oss`ble the annual charge to income account (over the esti- mated lives of the assets, in depreciation). Because of this iti is sometimes wrongly assumed that depreciation is a fixed cost. The accurate determination of variable cost requires that the value of all the resources consumed in carrying traffic at any given future level should be quanti- fied. It is clear that an additional train, ev n an additional carload, will cause some additional rail wear and may have some effect, although to a lesser extent, on sleepers and ballast. This element of tha cost of moving additional traffic must therefore be evaluated. 2.23 The princi-pal causes of track depreciation are (a) phnysical wear and tear resulting from use and (b) deterioration from exposure to the elements, essentially a function of timne rather than use. For rails and turnouts, cause (a) is generally all-important; for sleepers and ballast cause (b) has by far the greater effect, altho-agh (a) cannot always be entirely disregarded. The following method is proposed for calculating use-depreciation of track as an element of variable cost and for separating it between freight and passenger services. (i) Rails and Fittings. It is proposed that, for costing purposes, depreciation of rails and fittings should be based on their esti-mated capacity in terms of millions of gross tons, and not on their assessed life in years. The records and statistics of most railways will provide inform,ation on which to assess the total gross tons carried over each section of mainline ruiLning track between tha dates of original laying and first relaying, or between t-wo successive relayings. Tna capacity o: the rail, in terms of gross torOs, will varLy according to weight of rail and the differ-ing characteristics of the various sections of' tha system. Much will also depend on the condition of the replaced rails at the time they were lifted: for example, they nay have been worn both sides to the limit of their usefulness for any purpose except sale as scrap metal, or they may have been replaced uhen they had furtther useful life in order to provide matarial for relaying a lin2e of lesser importanca. The objective of tha inctuiz7 is to make a reasorablu estimate of the total capacity of rails of varying weight from first laying to eventual scrapping, by section of the line where there are wide variations of grade and curvature, or on an all-line basis where track charactersitics are generally compa^able throughout the system. The following example is of a railway of xeasonably homogeneous charac- teristics throughout: Rail and fittings, 80 lb/yd--US$20,000 per km, at current replace- ment costs, including labor. Estimated service capacity--l'I0 million gross tons. Depreciation--US¢0.0133 per gross ton-km (including l3comotives). Service, Year 1970 Millions of gross ton-km Depreciation, US dollars Passenger 1,500 200,000 Freight 4,000 533,000 Total 5,500 733,000 It is therefore suggested that depreciation of rails and fastenings be treated as an element of variable cost in both the short and the long run, and that it be separated between freight and passenger services on the basis of gross ton-km, as in the above example. (ii) Sleepers. Steel and concrete sleepers have a long life, and there is little evidence that, under the axle-loadings and general characteristics of train operation in developing countries, the life span of such sleepers is significantly affected by traffic volume. Depreciation of steel and concrete sleepers may therefore be considered as fixed cost. (Circumstances of the particular railway and a careful study of this matter may, however, indicate a somewhat different picture in regard to fixed and valuable costs on that railway). Wgoodan sleepers, on the other hand, which, particularly in the tropics, have a comparatively short life, are affected more by climate than traffic volume. Engineering opinion, which has been sought in a number of 19 countries, usually supports the view that var.iations of about 10 percent above or below the all-s'rsterat averz.ge life o, wooden sleepers will occuar on sections of the lowest and higchest t-rain den_sity res;pectively. In each case, thneref'ore, the o-oinion of -uha en_xnee:rs rogarding the life va;--iab litv- of wooden sleeaer_ ralativae to vaiia-iono in traffic vo'hne should be sought in order t,o arrive au a ratio of' cost va-iability of depre ciation. Depi-actai-`Lon should De calculaued at current replacement values, including -he labor cost of plac-ing seexers ir. the track. Sleeper depreciation that varies in relation to traffic volume shouald next' be separated between passengear and freightn service ir.proportuon to the gross ton-kai (including loco•aotives) of each respect,ive service. (iii) Ballast. Renewal of ballast is normally undertaken on an annual program of sufficient magnitude to maa ntain the track in good condition at all times. There is no evidence to show that on any rail- way the life span of ballast on light traffic lines is different from that on tracks of higher traffic denc-ity or on the railway as a whole. The volume of ballast per meter of tr-ack will of course be greater on high-density lines than on those of Lower density. If traffic should Lncrease substantially on a low-density lirne the amount of ballast might need to be increased to the maximur width and deptQh prescribed for high- density lines. The cost of the added investment (cost of capital and renew.al) would of course be included in prosDective variable costs. So far as ballast is concerned, the recurrent cost of renwal may be taken as a fixed cost, but ari engineering opinion should be sought as to whether, in the even of the traffic forecast being realized, any addi- tional ballasting would be needed to raise the track to a higher standard coimmensurate with the higher traffic density. Any added cost to be incurred in this context would, of course, be apportioned to freight or passenger service in proportion to the relative projected growth of each service, in terms of gross ton-km over the lines requiring improvement. (iv) Points and Crossings. These have a relatively short life, anid their depreciation can be considered as directly variable with the vouLŽne of traffic passing over them. Renewals of turnouts are normally charged to income account as and when they are made, usually on the basis of a regular annual program. Engineer's records should -provide information from which separation can be made batween turnout renewals in the mainline, running sheds, passenger and freight stations, and marshaling and shunting yards. It is suggested that as a general rule the cos-t of renewing turnouts in the mainline, running sheds, passenger and freight stations, and marshaling and shunt-ng yards should be 20 separated between freight and passenger service on the basis of t-ain- km run in each service. Those in passenger and freignt s .ations should be allocated directly to the respective services, and thoe in marshal- ing and shunting yards should be allocated as detailad under Yard Operation (para. 2.67). 2.24 It will be notea that track dep:eciation, as al elamsnt of' variable cost, has been mentioned in relation. to,-yard operation only under the heading of points and crossings. At the slow speoed of traffic movements in yards it is not considered possible to measure variations in the rate of depreciation of rails, fastenings, sleepers, or ballast in response to changes in traffic volume except in the ve.y long run. At this point, of course, all costs would tend to become variable. For purposes of a "long-run" period related to the duration of proposed tariff changes it is suggested that yard track depreciation, other than- for points and crossings, should be conside;^ed as fixed cost excent where additional investment is needed to enlarge the capacity of exist- ing facilities. in this case depreciation and intera3t on the added investment would necessarily become part of future variable cost. Maintenance of Works 2.25 The majority of the maintenance works included in this catecory (items 1.20 to 1.39 of Appendix A) are common costs of passenger and freight traffic, and none of them is likely to vary directly in relation to traffic volume. In fact it would be safe to say that normally they are either fixed or capacity costs. In the case of capacity costs it would be necessary to determine whether current capacity provides a sufficient reserve to handle the projected growth of traffic within the period of the projection. For example, if the signals and telecommunica- tions facilities are considered adequate to cope with the increasad train and car movement, the overall level of expense for maintenance would remain fixed within the relevant period while the cost per unit of output would fall. If an exceptional growth of traffic were to be fore- seen, or the period of the projection were to be substantially extended in, e.g., investment evaluation, some increase and improvement of facilities might be needed. Hence maitenance of signals and communications might become a variable cost, although variability would in any case be considerably less than in direct proportion to the increase in traffic. 2.26 A number of maintenance of works costs, e.g., maintenanca of passenger stations and passenger-car workshops, are directly assignable to one or another of the services. Although they may well be taken as fixed costs for purposes of assessing the financial effect of normally foreseeable changes in traffic volume, they have vital significance in 21 the context o0 det rmining the overa7' profitability of the particul.r service. in the event of to alj. abandonc)iant of the servica, for example, such direczly assignable costs would be avoidable, w.hereas common costs would be unlikely to be avoidable except in some less-than-porportionate degree. 2.27 In general, then, it may be asumzed that maintenance of works on the majority of railways ntay be consLdered to De a category of costs unlikely to respond except to an insigfnificant exten-- to normal changes in traffic volame. In the t-im.e period i-alevant to tr7affic costing for price-fixing, normal changes in trafic volime may be assum.ed to be the rule rather than the exception. General--Social Security and Pensions 2.28 In countries where social le-isi½tion prescribes certain benef its by way of bonusas, retirement, redical and health benefits, and the like, it is usual to record the total cost of each benefit by creating a separate series of primary expense accounts for each depart- ment of the railway (see items 1.40 to l1.43 of Appendix A). Pensions, whether charged to revenue as and when paid or provided for by contribu- tions to a pensions fled, are normally segregated in a separate primary account at the end of the classification of expenses (see item 7.01 of Appendix A). 2.29 For both social security benefits and pensions the costing office will be faced with the problems of separating the costs between fixed, capacity, and variable cost on some logical basis relaGed to the numbers, pay, and eligibility of the staff included ander each category of cost. W'here pensions are provided for by contributions to a pension fund, such contributions are usually calculated as a percentage of qualifying emoluments, determined after actuarial investigation. The assignment of the contributions in proportion to the relevant subdivision of costs is thereby simplified. Where pensions are charged to revenue as and when paid, the calculation of the accruing liability to serving staff is made more difficult, but some relation between salaries of pensionable staff and current pensions payments can usually be established. Other social security benefits may be of diverse character but normally can be related to the grades, salary scales, or emoluments of the staff concerned. They are therefore susceptible of proportional separation between fixed, capacity, and variable cost, once the wages bill has been analyzed.- 2.30 Hospital, medical, and health benefits are of a peculiarly personal nature and are usually extended to the families of railway employees as well as to the employees themselves. Costs may vary widely 22 between one section of railway work and another, but for purposes of prjecting operating costs it would seem that there is no alternative but to calculate an average per capLta cost and tc apportion total projected costs between fixe6, capacity, and vEriabla cost Lr. proportion to the number of staff whose pay anu allowances have been assigned vo these cost categories. it must always be clearly borne in rn nd vhat the purpose of the exercise is to dete;-rane as nearLy as possible the effect on expense of any projected chan£ge in traffi3 volume and that every aspect of costs, indirect as well as direct) r.ust be considered. If additional men are required to handle additional traffic their fringe benefits, including pension entitlement where this is applicable, will increase just as surely as the wages bill. equipment Maintenancel/ (a) Superintendence (See paras. 2.03 to 2.06) (b) Workshops Maintenance of Locomotives 2.31 In conformity with the ICC Uniform System of Accounts, which has been adopted on many railways outside the US, primary expense accounts are provided for each type of traction (steam, diesel, electric, and railcars) and separately for mainline and yard locomotives of each type (Appendix A, items 2.02 to 2.08). Yard locomotive maintenance in this context would normally refer to workshop repair of locomotives designed specifically for yard shunting duty. It is, however, common practice on many railways to employ maintenance locomotives on yard shunting duties whenever the exigencies of the service so require. For costing purposes it will be necessary to determine the total cost of locomotive maintenance whether of regular shunting locomotives or of mainline loco- motives involved in yard shunting operations. It is also necessary to determine the maintenance cost of locomotives employed on wayside station shunting, normally classified in statistics as "train-locomotive shun- ting." To make a closer estimation of costs in this and other contexts it is essential that adequate and comprehensive operating statistics should be maintained. In Appendix B a detailed list of statistics is proposed, with definitions. / This Classification of Expense assumes an organization under which the Mechanical Engineering Department is responsible for workshops maintenance of locomotives and workshops and line maintenance of passenger and freight cars. Paunning shed mainTenance of locomotives is the responsibility of the operating, i.e., Transportation Dapartment. 23 2.32 Frori the statistics so p^oduced, it should be possible to make an acceptably accurate separatlion of mainline locomotive workshops repair costs between line-haul, yard shurb3ing, and train-locomotive shunting on the basis of' mainline locoir.otfve-km rn on each re3pactive duty. The unit of locomotive-kma is u5sea -rn tas conte-;t because _t zs normal wo-rkshop practice to prescri'b in T.h- iLnterval between any two scheduled repairs in terns of kilome.eris lun by the locomotive dur-ng the relevan-' period. 2.33 Many railways do not follow tne ICC Uniform System. cf Account's and do not differentiate in the accountirtg classification between main- tenance of mainline and yard locomotives, altUhough costs in all kno-wn cases are maintained separately for all locO;daotives of differing types of trac-ion. In such cases reference will oe necessary to the individual job costs maintained (with rare exc&ption) in the workshops cost office. Where particular classes of locomotive are designed for or are solely employed on yard shunting duties their maintenance costs can be s3gre- gatedL he maintenanc3 cos;s of all oIhe- locc.-Lotiv-es should bs separated between line-haul, yard shunting, and wayside station shunting on the same basis as in paras. 2.31-and 2.32. On railways where locomotives are widely interchanged between services and where statistics or costs are not otherwise available, "locomotive-hours" or "fuel consmied" have been found to provide a reasonably accurate basis for distribution of work- shops maintenance cost. 2.34 In the normal course of everts it can be assumed that work- shops maintenance of locomotives expense is a long-run variable cost. (The formula for the variability of maintenance with the factor of engine-kmn may be "refined" by analysis, as some part of workshop repair expenses Tay be time related). Certainly materials used for workshop maintenance will represent variable cost, both in the short and in the long ran. It is usual also to find that labor costs will vary in tha long run and that training schemes are geared to provide the additional skilled staff needed to provide an increase in workshops output comnen- surate with the projected growth of traffic. In certuain circumstances, however, and particularly during periods of conversion to more efficient forms of motive power, a surplus of labor that can be absorbed only by the combined effects of attrition and increasing workload may well exist in the workshops. In such a case it will be necessary to compare the present workload with the assessed capacity of the shops (the capacity utilization factor). Then, with due regard to projected traffic growth and the probable rate of labor attrition, reduced by the output from existin-g training courses, it will be necessary to forecast the point at which the capacity utilization factor will reach 1.0. From these data tne variability of workshops maintenance cost within the period of the projection may be calculated. T"he methodology is discussed later (para. 2.102). 24 2.35 At the present stage the pu:pose of the exercise is to separate the variable costs of locomotive maintenance between line-haul, yard shunting, and wayside station shunti:ng on an all-line basis. Clearly there will be ditferences in the relative costs of maintaining steam, diesel, and electric lccomotives, ar.c withLn eacr. type oa'motive power there will be substantial differences lbeteen locorPotve,s of varying design, e.g., between a conventional steam locomctive and one of Beyer-Garratt or Mallet design. Althougfh com-paring costs of loco.-o- tives of varying types is essential in other contexts (e.g., evaluat_ron of future investments), for price-fixing the only relevant cost is the future cost of operating under the best technological standards likely to be achieved on all operations on the particular railway under consideration (see para. 4.03) in the relevant time frame. (c) Workshops Maintenance of Freight Cars 2.36 In normal circunstances it raay be assuied that tha whole of the expenses under this head will vary in direct proportion to the number of freight cars in use, and this will depend on projected improve- ments in technological and operating stancards. For example, where a large program is under way for replacement and expansion of the existing fleet by cars of greater capacity, the increase in workshops maintenance will consequently be less than proportionate to the increase in traffic handled, because of the expected improvement in the average carload. Detailed analysis of all the elements of workshops maintenance expenses may furthermore indicate that the variability of some elements is less than directly proportionate to car utilization, although the magrnitude of such indirectly variable elements is not likely to be of great significance in relation to overall total expenses. On the other hand, if the ratio of cars under or awaiting repair is excessive (say over 5 percent) then is present repair output inadequate beause of insufficient labor and material inputs or alternatively because of excessive age and poor condition of existing cars or inefficient use of existing capacity? The effect of expected technological improvements should also be con- sidered, such as the replacement of friction by roller bearings or the use of dynamic braking on diesel locomotives, which can dramatically reduce expenditure on brake blocks especially on mountain sections. However, where doubt exists it would be well to assune direct variability of workshops car maintenance cost to car-days in use. It is preferalJ-1 to overstate long-run variable cost slightly rather than to underst-ate it. Similarly it may be argued that workshops maintenance of freight care is more a function of the number of times a car is loaded than the kilometers it runs or the days it is in use and that most damage is caus&d by rough shunting. If, therefore, because of expected improvements in oparating practice it is projected that the n-mber or car loaoings will increase faster than car-days, the varia-bi-.tv of ;Lorkshuos maintsnance costs may be related to changes in the ruamber of cars loaded. 2.37 T"_e nex-L ste- is to 3e0&ra -.kl va;aole C03v of freight- car repairs between passenger and 'reig>ht service. This is necessary Decause freight cars are used foi- -zhe cazrage of not only public freight> but also railway fuel and mwaterials that- are essential 'or passenger as well as freight transport. A smaall nu_rmtber of railways maintain statistics of carloadings of railway fuel and materials and related car-am. Wihere this is done t'he apportionment of expense between public freight and railway service freight can be made on the basis of the relative car-Icn or carloading, as appropr1ate. Ihere records of carloadings and car-la of service and public freight are noc separately recorded (and this applies on the large majority of railways) the only available basis of apportionrnent of car repair exoe-l_e between public anr service freight is the net ton-lan of each ciass ol freight. Such statistics are aLmost universally maintained. 2.38 Having separated freight-car repair expenses between public and service freight it is then necessary to apportior, a relevant part of service freight expenses to passenger service. lxperience indicates that the unit that best explains variability of service freight is the train-lkn. It is therefore on the basis of the relevant train-kma 4n passenger and freight service that railway service car repair expense should be apportioned. 2.3'Q On railways where private owners' cars are operated and here the repair costs of such cars are borne by the owners, the car- on and net ton-la cariied in such cars must of course be excluded from the formula for separating works repair expense between public and railwair service. On railways having interconnections with other svsteins all foreign cars should also be excluded. .. 40 Finally, as shall become more evident when considering unit costs, the workshops cost accounts should be analyzed to determlne variations in repair cost between the various types of freight car, e.g., tank cars, livestock cars, boxcars, gondolas, etc. (d) Line Maintenance of Freight Cars ?.ll .Running repairs of freight cars are carr_ed out as and when required. Although it is likely that much of the wear and tear of the bory takes place during shunting operations, it is usually found that 2o the car-kIa best explains variability of line maintenance expenses, which are generally related to bogies, w.neels, and runring gear. The whole of these expenses should be taken as directly variable unless extra- ordinary circumstances exist to indicate otherwise. 2.42 Separation of experi3es betw.3en ?ubLic and railway freigght, and between passenger and freight services, should follow the sama patte-rn as for workshops maintenance expenses. (e) Workshops Maintenance of Passenger and Related Cars 2.43 Expenses should be separated between passenger-carr1in' vehicles (by class of travel), restaurant and canteen cars, and express., mail, baggage, and brake vans. In normal circ-mLstances tney should be taken as directly variable in relation to car-cn and allocated to passenger, express, and mail service respectively. (f) Line Maintenance of Passenger and Related Cars 2 .44 These are directly variable expenses and should be treated as in the previous paragraph. (g) Maintenance of Ballast Cars 2.45 In the earlier discussion of ballasting expenses (para. 2.23 (iii)) it was indicated that in normal circumstances such expenses were fixed except where increased capacity of the ballast section might be required. The same principle should be applied to ballast-car mainten- ance expenses. Maintenance of the existing fleet should be taken as a fixed cost; cost will vary only when and to the extent that additional investment in ballast cars is projected. (h) Maintenance of Inspection (Business) Cars 2.46 On most railways inspection cars are not intensively used, and in the time period relevant to rate-making it would be safe to assume that expenses of their maintenance would be a fixed cost. If an expansion of the fleet is contemplated some costs may vary but in any case the degree of such variability should not, normally exceed that of super- intendence expenses (para. 2.06). 27 (i) Matntenance of Other Works Eq'uiprient 2.47 >xca-t where it is -proposerd to extend -ahe use of mechanical works eui-psmrer. the exo:ei.se of main ni tha- eELdstirq; eoui-,pment may be taken as .:iXed casvt Tf addi,ionaltechanical 'Mpea-nt is to be introduced) -he additiofnal coSt of its maintsnance shoulQ presimably be offset Dy savLngs on other sbheads of labor cost. (j) Depreciaztion of Locoam-otives and Rolling Stock 2.4& Provision is normally made for thu wear and tear of locomrlo- tives and roi1 ling stock by charging against revicnue an annual suLm for depreciation. This is based usually on currentu re,_acoioent values but occasionally an original cost, divided by the engineer's assessmrent of the line of -he equipme.nt ir. years, the objectie 'being to equalize as far as -ossible t'he annual charge to inco.ae acoo'=t over t,he estimated lI-fe of the assets. !3ecause of ti-s, depecdiataon is sometimes w.ongly assumed to be a fixed cost. The accurate dete mination of variable cost rec.aires that the value of all the resources consumed in carrying additional t-raffic should be quantified. It is clear that by running an additional traffic should be quantified. It is clear that by running an additional train or carload some additional wear and tear of the locomotive and rolling stock will be caused. 2.h9 The princiDal causes of depreciation of locomotives and roll-ing stock are (a) physical wear and tear resulting from use and (b) obsolescence. Equipment that is intensively operated -will have a shorter life than that which is underutilized and is less likely to become obsolescent. For costing purposes it is proposed that depreciation as shown in the accoints, based on prescribed lives of tne assets in terms of years should be discarded, and replaced by use-depreciation based on the engineers' estimates of lives in terms of kiclcometers, as indicated in the example shown in Appendix C, Table C3. 2.50 Depreciation calculated in this manner should bae treated as directly variable cost (the difference between this and any accounting depreciation may be considered as fixed cost) and should ba separated between jassenger arid freight services in the following manner: Locomotives Passenger--line-haul ) Passenger--yards ) allocate directly Freight--line-haul ) on basis of Freight--yards ) Locomotive-Icn Freight--wayside statLon shunting ) Departmental-allocate to passenger and freight on basis of respective train-km. Freight cars Allocate between public and railway freight as in para. 2.37; railway freight proportion is to be allocated to passenger and freight services in the ratio of respective train-1aa. Passenger and related cars Allocate to passenger, mail, and express. (k) Maintenance of Wlorkshops Machinery 2.51 This is an indirectly variable costi influenced by the intensity of use of the plant, and the degree of its variability should be ascertained by study of past trends. The variable cost so ascertained should be separated between passenger and freight serrice and between line-haul and terminals, in the same proportions as the total variable costs previously determined for maaintenance of locomotives and rolling stock. (1) Maintenance of Power Plant -52 This may normally be taken as fixed cost unless extensions to the plant are projected. (mi)Maintenance of Water Supply Machinery 2.53 On railways converting from steam to diesel operation this item of expense may be expected to decrease. An engineer.s estimate of the potential savings within the period of the projection should be obtained. On fully dieselized railways maintenance of water supplies would normally be a fixed cost. 29 (n) Depreciation of Machinery 2.54 The degree of variability and the allocation of variable cos: to tha respective services should follow the pattern of tie dis-;ri.uti3n of costs unrder the pirecedilng thrree par^agraphs 2.51 to 2.53. (o) Ojfice Supplies, Miscellaneous 2.55 Allocate in proportion to total expenses on equipmant maintenance. (p) General--Social Security and Pensions 2.56 See Maintenazce of Way and Wtorks, paras. 2.28 to 2.30. Traffic (Cammercial) DeDartment 2.57 Experience ind^icates that the expenses of this department, which in most cases are relatively insignificant, should vary directly with traffic volume if commercial and market research activities are to be adequately maintained. This may not be so in a minority of cases where a large department has been established, capable of looking after all present and prospective customers and conducting adequate market research. A decision on future costs of the department should be based on administration policy. Transportation (a) Superintendence 2.58 See paras. 2.03 to 2.06. (b) Dispatchers 2.59 Irn nonmal circumstances, expense under this head might be expected to vary in ratio to the number of trains rur, ard this, as a consequence of improved technology, should be less than proportionate to traffic growth. Separation of expense between freight and passenger services snoula be made on the basis of train-km in eacn respective se-rvice. (c) Station Staff -.5C Tn the proposed classification of expenses presented in Appendix A (items 4.03 to 4.C5), separate allocations are su-gest-ed 2cr staff employed solely on passenger or freighat dutias or on dutias common to both services. At present the genera± practica is to allocate all station staff salaries, allowacss, ar. otner solents to a sngla item of expense. It will therefore be neces3say to undartzke consider- able investigation of establis;hment rolls to seParate expanses in the first place between those allocable either to fznaight and passenger service directly or to operations conmnon to botoh services, and in tha second place to separate them between directly variable, indirectly variable, or fixed cost raspectively. However, analysis of the functions of the staff will in most cases indicate whether the expenses of their employment are variable or fixed costs. Passenger or freight booking staff, for example, may reasonably be assumed to represent directly variable cost on the grounds that the number of staff employed shoald be no more than sufficient to handle existing traffic. In any location where bookinguduties do not constitute a full day's -work the staffL will be employed part time on other duties and will therefore fall within the category of operations common to both freight and passenger services. It is in this connection that the chief difficulty will arise in determining the relative proportions of fixed and variable cost. At most wayside stations, for example, booking of freight and passengers is a relatively minor part of the day's work. On single-line railways in particular, the'clearance and crossing of trains and related operational duties are the main preoccupat,ion of the staff. For such purposes staff is normally provided in sufficient numbers to man the station throughout the 24 hours of each day. They should therefore be capable of handling traffic up to the maximum capacity of the line in terms of train paths. Within that limitation, therefore, staff expenses at wayside stations may be taken as fixed costs except insofar as freight or passenger traffic at any particular station is suffic'iently large to justify employment of staff spocifically for freight or passenger booking. Examination of the station staff rolls will normally provide the requisite information. 2.61 For larger stations, as much analysis as possible should be undertaken from the station staff rolls. Thereafter, whenever douabt exists as to the capacity and future variability of staff strength in response to changes in traffic volume, the matter should be discussed with experienced operating officers in order to deteramine tne probability and magnitude of any prospective variation. 31 2.6/2 Wherever possible, variable costs should be allocated directlv to the service for wnich they are Lwcu:-red. Variable costs ttat cannot be allocazed to freight or passenger services directly, but w:hich ai-, cofar,on to 'both, so,LCul De sesarated between tUhe respect-ive services in propo-ticr. to the operatin_g uni (e.g., train-tn) tnat appears to explain best the variability of cost. 2.63 In this discussion it will be n3ted that the proposec analysis is based on station staff rolls, whichnill produce results ,n terms of numbers of men, not in terns of money. Nuumbers of man should oe translated into equivalent expense by raultiply-Lg therm by the average emoluments of the relevant grades. Because of the inte-- changeability of staff this method will produce a more representat~ive figure for costing purposes than the actual emol-umernts of individual staff occupying specific posts at any specific time, a figure tha- in any case would require excessive work and time to produce. (d) Station Supplies 2 .64 Expense under this head should be separated between fixed and variable cost, and between passenger and freight services, in the same proportions as determined for station staff. (e) Yard Staff 2.65 V-ith the exception of yardmasters, their assistants, and clerical staff, the number of men employed in yards will be governed by the number of yard locomotive shifts oparated. In the very long irLn the number of yard locomotive shifts will be adjusted to traffic volume so as to produce a cost variability of close to 100 percent. In the time period relevant to rate-making or tariff adjustbrent it may well be found, however, that in certain yards, because of the indivisibility of a locomotive shift or a worker's turn of duty, there is surplus capacity of both locomotives and yard staff. In small yard, for example, there may be sufficient car movement to require a yard locomotive, and its attendant yard staff, although the amount of work to be done may be substantially below the potential output of the locomotive and staff in a normal day's work. Similar'Ly in a large yard a point will be reached when the capacity of the existing shifts of locomotives and staff has been fully absorbed. An additional shift must -.-hen be introduced, and this in tunri will. provide surplus capacity for a significant period until traffic voliLme increases to the point at which one more shift- aust aga-in be introducec. 32 .66 To determine the situatior in each yard and the tirme taken to DerformL individual movements oetween the various locations served through the yard will require exhaustive field studies. As was suggested in the introductior. (para. 1.28) this task should be undertakern in the process of refining the ccsting system. in the initial stage cf costing for general rate-making purposes it is suggested tha- a s uf-icierf ty realistic assessment of yard capacity u-` liz-aion can be .made on an all- line basis by assuming that all locomot_ve shifts except the last one introduced in each yard are worked to capacity and that the last locomo- tive shift introduced in each yard is worked, on averare, to 50 percent capacity. To take an actual example, where 80 yard locomotlve s;^ifts are operated in 12 yards, then 68 shifts nay be assuimed to be fully utilized and 12 utilized to 50 percent capacity--in other words tha all- line capacity utilization ratio is 74:80 or 0.925. For simplicity of calculation 92.5 percent of yard expenses can be treated as dir^ectly variable cost, the balance being unused capacity cost that will be absorbee wihen traffic volume, measured in terms of cars oadings a 2.67 In Appendix B, paras. 2.02 and 2.03, a proposal is made that yard locomotive hours should be separated between freight and passenger working. Unfortunately this separation is rarely if ever made at present. Therefore the separation must be made on the basis of either special studies of those yards where passenger trains are marshaled, or on the advice of experienced operating officers having intimate knowledge of the working of each yard. (f) Yard Locomotive Crews 2.68 In Appendix A, items 4.09 to 4.28, it is proposed that separate primary expense accounts should be established nor yard locomo- tives. This is in accordance with the ICC Uniform System, slightly elaborated to provide a breakdown between passenger and freight service. 33 Where the ICC rules are foIloved (-mainly -n certain countries of the western Hei-iisphere) yard locomotive costs are readily available. In most countries, however, all locomotive crew costs, mirnline and yards combineed, are included in a single expe-.se acco.nt. As a first step, therefore, it i s necessa-r to separate yar2d c-svs from l'ine-haul costs. .L is often fo-and that this separati-n ca- be done or tha basis of staff 'rades. For example, yard locomotive ir_vers -ray ba Sraded as "Fireman, passed driver" or "D.river, Grade TV,"1 and their pay and allowances can be calculated on this basis. Alternativaly locomot-ive hours in use, mainline and yards, can be related to average pay and allowances of drivers and firemen in the resoecTive duties as ascertained from studies of the payrolls. In practice it is usually found that a dependable method of separating line-haul frXrm yard locomotive crew expenses can be devised, but nonetheless it is strongly reconomanded that, on railways where they dc not already exist, separate primary expense accounts for yard locomotives should be introduced. 2b.- After the cost of yard locomotive cr has been determir.ed, the variability of such cost and its separation between passenger and fLreigh-t working should then be determined in the same manner as yard staff costs, discussed in paras. 2.65 to 2.67. (g) Yard Locomotive Fuel 2.70 On railwayS that follow the ICC rules, Tuel expenses will be recorded separately for yard and mainline locomnotives. On other railways where a single expense account is maintainied for all locomnotive fuel, fuel consumption by class and type o- locomotive may be calculated by referring to the statistics generally maintained in the office of either the Chief Operating Superintendent or the Chief Mechanical Engineer. These quantity statistics can be translated into separate expense totals for yard and mainline working by reference to the unit prices ol' each form of fuel consumed. 2.71 Yard locomotive fuel expenses should be treated as directly variable cost and separated between passenger and freight working in the samLe manner as yard staff and locomotive crew costs. (h) Yard Locomotive Water 2.72 If locomotive water consumption is not separately recorded for yard and mainline locomotives and for steam and diesel traction, a formula to achieve this must be evolved, on the basis of either special 34 studies or statistical analysis of any available records maintained iDy the Mechanical Engineering or Operating Departments. Attention shou:Ld first be directed to separating water expenses between steam and diesel working. After that, if a positive record of quantitative consumption is not available, it may be assumed that within reasonable limits of accuracy separation ot cost betwreen yard and mainline working, and be- tween passenger and freight services, may be prorated to fuel consumption. Water expense for steam locomotives will cf course greatly exceed that for diesels, although the latter may not be insignificant and must be known in order that future costs may be appropriately adjusted on rail- ways where conversion from steam. tc4diesel traction is under way. (i) Yard Locomotive Lubricants 2.73 The same probleris will arise, and the same action must be taken to resolve them as for yard locomotive fuel. Lubricant consunption and cost per locomotive-ian will, of course, be substantially higher for diesel than for steam locomotives (see also Appendix B, para. 10.02). (j) Sundry Materials for Yard Locomotive 2.74 In the absence of any separation in the primary accounts between mainline and yard locomotives, it is suggested that expense under this head should be allocated to yards and mainline haulage, and to passenger and freight service, prorated to locomotive-hours in use. In Appendix A, items 4.09 to 4.28, it is recommended that for this arnd all other locomotive running expenses separate primary expense accounts should be created for yard locomotives, follo-wing the example set by the ICC Uniform System of Accounts. (k) Running Shed Maintenance of Yard Locomotives 2.75 on railways whose expense classifications conform with the ICC rules, there will be one primary account for yard locomotive mainte- nance and another for mainline locomotive maintenance in running sheds (engine houses in North American terminology). In such cases the separation of yard and line-haul costs is sim.plified. On many other railways there is usually only one accounti for ranning shed maintenance of locomotives (mainline and yard) of each type of traction (steam, diesel, etc.). In these cases difficulty will arise in separating running shed maintenance costs between yards and line-haul, and the degree of difficulty will depend on the relative accuracy and detail of time recording and invent ory contr-l. Deter-mination of yard loco- motive maintenance expenses in ruLning sheds will probably requira a special study during a representative -iod of noa.al wojicing in each runnir.g shed. There are instances, however , wher-e °ob costing nas been extended to uniryg sheds, and as a result- tV.he res-n)ective co_ts of yard operation aEnd -hnline wor.ing may b3 ceter.ed with relati4ve ease. Ex-perience shows that there is no great d-if.f-icLulty in accounting separately for running shed maintenance of yard and imainline loco.aotives. tWhere this has not been done in the -oast it is recowrnended trat it s1iould be stsrted inmmediately as shown in Anp&efdix A, item;rs 4.26 to 4.28 and 4.-3 to 4;.66. 2.76 In normal circumstances rurnning shed maintenance of yard locomotives should be taken as a directly variable cost. Certainly the cos-t of consumable stores will vary in direct propertion to the number of locomotives requiring attention in the sheds, and the latter .'Li -.k:ill in turn tend to increase in response to higher carloading.s and car-km. -where the use of existing types o-° traction is expected to continue, the number of staff employed in the sheds may also be expected to increase in proportion to the number of inspections and repairs to be undertaken. If.a changeover from one type of traction to a more efficient type is contemplated, some reduction, retraining, and redeployment of staff will be involved, and it will be necessary to adjust future costs accordingly. The underlying principle of direct variability of cost of maintaining each type of traction will, however, remain valid. For an example of the suggested method of estimating future variable cost of running shed maintenanca, adjusted for projected conversion from steam to diese-L traction, see Appendix C, and Tables 2.1 and 2.2 in paras. 2.105-6. 2.77 Separation of costs of running shed maintenance of yard locomotives between freight and passenger servicas should follow the nattern adopted for yard staff and locomotive crew costs. (]) Mainline Locomotive Expenses--General Comment 2.78 The difficulties likely to arise in separating yard from mainline locomotive expenses have been discussed under each of the relevant headings of yard locomotive expenses. In the fo'llowing para- graphs it will be assumed that the appropriate separation has been made and that mainline locomotive expenses are known in total. Therefore the only problem remaining will be to separate mainline locomotivea expenses between freight and passenger services. (Passenger service in this context will be assumed to include such ancillary services as express, luggage, parcels, and mail that are noznally hauled on passenger trains. The breakdown of passenger train expenses between passengers of each of the ancillary services will be made at a later stage.) 36 2.79 In Appendix A, items 4.3C to 4.50, it is proposed that mainline locomotive crews and fuel expenses should be broken down in the primary accounts between each of the services involved, viz., passenger, freight, mixed, and depart-mental. (For definitions see Appendix B, paras. 1.03 to 1.06). ln all known cases -his will involve refinement of the allocation, of locomotive crews' pay and allowance vouchers and of fuel issues. Although there would a?pear to be no great difficulty in introducing, such a refi^aerv of ex-oense allocation, in the ensuing paragraphs io will be assumed that the information is not currently available and thati an alternative ba;ai s of separating expenses between the relevant services must be found. (m) Mainline Locomotive Crews 2.80 In many cases it will be found that locomotive crews are graded according to exoerience and degree of responsibility and that driving of certain classes of trains is restricted to particular grades of crew. This will provide the basis for allocating the relevant part of locomotive crew expenses. For the rest a subdivision of expenses should first be made between those which are time-related (salaries, overtime allowances, etc.) and those which are distance-related (e.g., mileage or kilometrate allowances). Time-related expenses should be separated between services according to the ratio of the respective train locomotive-hours plus train locormotive shunting hours (Appendix B, para. 2.02) worked for each service. These hours are reduced as necessary for multiple-heading of trains with a single locomotive crew, i.e., by the exclusion of assisting locomotive hours when such assisting locomo- tives are not manned. Distance-related expenses should be separated on the basis of mainline locomotive-Ion run in each service (again exciuding assisting locomotive-Ian when not manned). 2.81 After separation of locomotive crew expenses between passenger, freight, mixed, departmental, and wayside shunting services, it next becomes necessary to reallocate mixed train crew expenses to passenger and freight services in proportion to the respective passenger and freight vehicle-km run on mixed trains. Similarly departmental train crew expenses are reallocated to passenger and freight services, by prorating to passenger and freight train-km (including proportion of mixed in both cases). A formula for the allocation of mainline locomotive crew expenses, with figures representing a hypothetical case, is proposed in Appendix D. 2.82 Mainline locomotive crew expenses of all categories should be treated as costs directly variable, relative to passenger and freight train-km or train-hours as appropriate. 37 (n) .>:.;ir.liTie Locomotive Auel 2.83 rn tne Absence o' direcr al'ocation to the various services -r, the primarv accounts it will be necessary to find a dependable starti stiZal b'siS for analysis of fiedl erCpenrsas3 n later stages o-f ref-i:nement, o_ tha cos-Ling system., speciaL studies c-a-n be undertaken to deterine comparative levels of fuel consu.I,-.0io.., in71opposinag direcvions Oil diIferent sectio-ns of the line, and by various classes of 'rain. For general rate-making purposes, howeve-_r, on all railways exce-t those constructed in exceptionally mountainous country;, it is generally found that fuel consu-xxtion per 1000 gross trailing ton-icr is a reasonably consistent measure, both as an all-line average Lnd by revions or sections. For example, on a railway of Dver 3000 route-icZ.n, wit'h an undulatingr line rising no more than 70G0 neters above sea level at any point, fuel consumption per 1000 gross tra-ling ton-kRm in any district of the system, did not vary from the all-line average by rore than 2 per- cent. On the other hand, in Pera 'or examole, where tha line rises to almost 5000 meters above sea level in a relatively short distance, it is obvious that there will be considerable directional variation in fuel consumption. There should be little difficulty in determining the magnitude of variation in such exceptional circumstances. In more ordinary cases the suggested measure of fuel consumed per 1000 gross trailing ton-kc should provide a dependable basis for expense allocation by line-hatl services. 2.84 An exception will arlse on all railways in determining the amount of fuel consured by train locomotives shunting at. wayside stations. In this context it is sug-ested that fuel consumption per yard locomotive-hour in use (a figure that should be readily available) should be used as a multiplier of train locomotive shuiting-hours to arrive at the total fuel consLmed in wayside station shunting. If, in the engineer's opinion, it is necessary to inflate fuel consuruption of train locomotives, vis-a-vis yard locomrotives, because of their greater power, a factor to reflect the difference can no doubt be readily calculated. 2.85 Having determined the consumption of fuel in wayside station shunting, the balance of mainline locomotive fuel expense should in normal circumstances be separated between passenger, freight, and aeDartmental services on the basis of g:^oss trailing ton-. (ln this context "passenger" and "freight" w-ll inc-;Lude vheir respective propor- tions o;F "mixed"). Finally, departme.entai; fuel e:-o&nses will be allocated Lo passegre-r ind frei h-' sesrices inrproportic.n to the train-kcm run in eaci-I reszective service. A form;la fcr allocm.ting naainline locomotive .. el e:,spenses, A-ith ,igures re-presenting a hypothetical case, is proposed in A-opendix E. 38 (o) Water for Mainline Locomotives 2.86 Water expenses should be separated between the various services in the same proportions as fuel expenses. (p) Lubricants for Mainline Locomotives 2.87 Lubricant expenses should be seoarated between the various -services in proportion to the total mainmlne locomotive-kn run in each service. Separate calculations wiLl of course be made in this as in all other items relating to locomo;ive operations for each type of traction-,-steam, diesel, electric, and railcars. Mixed train fuel expense will be allocated to passenger and freight serviceis in propor- tion to the respective passenger and freight vehicle-kma run on mixed trains. Departmental train fuel expensas will be reallocated in prcptortion to total passengor and freigh;t train-icn, including the respective proportions of mixed. (q) Sundry Materials for Mainline Locomotives 2.88 Expenses under this head should be separated between passenger, freight, mixed, departmental, and wayside station shunting in proportion to locomotive-hours in use for each respective service. Expenses for mixed and departmental trains should then be allocated to passenger and freight services in the same Tmanner as in previous paragraphs. (r) Running Shed Maintenance of Mainline Locomotives 2.89 In the absence of running shed maintenance costs related to the service performed by the individual locomotives that come in for maintenance, it is suggested that the separation of expenses between services should be prorated by locomotive-km. In this context the locomotive-kmn is selected in preference to the locomotive-hour because it will almost invariably be found that the locmotive roster provides that a locomotive trip shall consist of a journey between certain locomotive-changing stationss on arrival at its destination the loco- motive will be inspected and will normally receive the same degree of maintenance, regardless of the time taken to travel from the previous locomotive-changing station. 2.90 Running shed maintenance expenses of mainline locomotives should be taken as a directly variable cost. The same considerations apply as in the case of yard locomotives (para. 2.76). 39 (s) Train Crews 2.91 Reference in most cases will need to be made to staff establishmrent lists in order to separate -assengc,er and freight crews. Or the r.ajori-ty of railwa-s, f'eight trains wi" carry only one guard, who w>_1 usually be of the lowest paio ca-pegry of trairn crew, -whereas passenger trains may have a hQead guard (conductor), ai assistant, one or more traveling ticket insoectcrs, and pe2taps baggage handlers. In somre countries, particularly in. mountainous areas freight trains raay carr, a number of brakemen irn addition to the head brakeman or guard. The separation of expense betweer. the serrices shou'ld not cause much difficulty, but it is recommended, as shown i_n Appendix A, items 4.67 tc 4.69, that the expense classification should provide separate primary accounts for passenger, freight, and departmental train crews. In the final allocation, departmental train crew expenses should be separated between passenger and freight services in proportion to the ti':iiC. 'un. in eachn service. Train crew e,penses should be treated as a directly variable cost relative to projeced train-kma. (t) Sundry Train M-aterials 2.92 Expenses under this head for a representative period should be analyzed; reference to material requisitions or issue vouchers should provide a reatr means of assessing tChe relative proportions of expense incurred for the vanrous train services. It is recormnended, as in Appendix A, items 4.71 to 4.73, that separate primary expense accounts should be introduced for passenger and freight services. The whole of this expense will vary directly with train-En. (u) Signalmen and Level Crossing Keepers; Telecommunications 2.93 In the time period normally relevant to rate-making or t.ariff revision it is probable that expense under these headings will represent fixed,cost. Costs would vary only if it were intended to extend the signaling and telecommunications systems, in which case maintenance and operating expenses,would increase proportionately, and the cost of providing capital for the added investmant would need to be talcen into account in assessing future costs. (v) General Expenses 2 .94 General and office expenses may be expected to vary in some degree in response to traffic growth and resulting higher activity in the departnent. It would seem reasonable to assume that the degree of variability would reflect the average of the department as a Whoia and tha; its allocation between services shoould be proportional to tns respective totals o1 all other variable expanses of the department. (w) Derailments and Accidents 2.95 Assuming that the condition of track and equipment is good and that operating rules are being observed, expenses under this head may be assumed to be a directly variable cost, relative to train-ki, to be separated between passenger and freight services in proportions indicated by recorded experience over a representative number of past years. (x) Claims and Losses 2.96 The greater part of this expense will refer to freight traffic and should be treated as directly variable with traffic voltme. In the further analysis of commodity costs, the value of the consignment wrill be the major consideration. (y) Social Security 2.97 See paras. 2.28 to 2.30. Express 2.98 The whole of the expense recorded in this section of the expenditure classification refers only to terminal costs--of collection, documentation, handling, dispatch, receipt, and delivery. The cost of providing and hauling express cars by passenger train is not included at this stage. In the initial costing phase, therefore, express exoensos should be classified under passenger service. at a later stage passenger Grain costs will be separated between passengers, express, and mail, allocating to each service all the costs properly incurred for its provision. 41 >.9 The ten-,l "ex-pess" is used main ly irn the Weste-rn Hemisphere, re -s usual to Drovide for the traffic specially designed vehicles for nA'-ssenger train wo-king. In other parts of lvhe world such terms as "oacceis traffic" or "nrande vitesse" are com:aonly used in the same context. ;he traffic is rnoLcLally carried eitvher by passenger trarLn in -hrnb orake or baggage c_r or ±-n freigh-ht cars at-uced-- noxraa'y Lo passengeI ;r .a-ns ut also on occasion to f&ast -reiht t-rain. Cor-iuson raay there- i :-e arise as to whezher the reven-ue deri-ecd froi the traff c, arnd the cost of' carryi.n it, are t,o be classi.fied as Lisser.ger,freight, or specific vo the traffic itself. Local conditions should be carefully sbudied so that revenue and expenses can be appropriately ;related. This can best be done after unit costs of operation have been developed, and this is considered in Section E of this chapter. Adninistration 2 .'.3O The circumstances applying i'_n the case of de-par-tnentni superintendence (paras. 2.05 and 2.06) are generally applicable to general administration, and the same procedure should be adopted to assess the degree of expense variability in response to traffic growth and resultant higher leve-Ls of activity. It is suggested that the separation of variable administrative expense between ser-vices and between line-haul and terminals should be prorated to the total variable expense allocated thereto. PensioL:s, Gratuities. etc. (See paras. 2.28 and 2.29). C. THE COSTING SYST&M--FREIGHT TRAFFIC--PREJI 10TIONOF FuTURE COSTS 2.101 The factors to be considered in the projection of future costs have been outlined in para. 2.02. In Appendix C an examp'le is rersented of a suggested method of making the initial analysis that will provide the basis for giving effect to each of the relevant factors. The example assumes a railway in the course of conversion from steam to diesel working. F'reight traffic is expected to increase at a rate of about 5 percent per year, and passenger traffic about half as fast. Much cf the increase in freight will corsist of bulk commodities -that will tend to improve car-oading. A program of freight-car replacement should enable arrears of maintenance to be undertaken, with a resultant reduction in the ratio of cars under or awaiting repair. These factors, combined with other opera-sional improvements arising from technological changes, are expected to reduce car -vurnaround to the extent that it 42 should be Dossible to handle an overall increase of 22 percent in fLreigh- traffic in the years 1971-1974 with only a marginal increase in the number of freight cars on line. Wages ar.d salary levels are exoected to increase by 33 percenv during the four yaars of the projection, accompanied by a possible rise of 22 perzant in the cost cf imnorted goods, capital and consuraable, in. the sarme pe-riod. The underlying factors, together vith other projected statist-cs of operation, are detailed in Appendix. C, Table C2. It is further assiuned that the costing study is based on the financial results for 1970 (after normalization - refer para. 1.08) and uhat costs are being developed in 1971 to provide a basis for a rates revision expected to be effective from 1972 to 197T. 2.102 Reference has been made earlier to capacity costs, and at this ocint it is necessary to explain how these have been dealt, with in the example shown in Appendix C. Wherever an expense item is considered to be a capacity cost it is identified by the letter C, and ag.-ains3 it is indicated the current capacity utilization factor, as assessed by the appropriate technical officer. If, for example, the present capacity utilization factor of any specific facility is 0.80, and the increase in the particular units absorbing the output of the facility (e.g., train-km in the case of sigrnals) is expected to be 15 percent during the period of the projection, no increase in expense will be incurred. The expense item may therefore be taken as tenporarily fixed for the purpose of the projection. If, however, the increase in train-km were expected to be 30 percent there would presumably be a 4 percent increase in operational and maintenance costs of the facility (0.80 x 1.30 = 104). Where a lc,ng-term investment program has been prepared the inclusion of additional (not replacement) investment in any field will confirm that the capacity of the facilities is expected to become inadequate within the near future, and this will provide an added guide to probable trends of operating and maintenance expense. 2.]03 In this context the special case of locomotive water supplies should be mentioned. If steam locomotives were to be operated indefi- nitely over a particular line the operation and maintenance of water puaping stations would represent a capacity cost, with perhaps substantial reserve capacity. In the example shown in Appendix C, however, where an extensive program of conversion to diesel operation is in hand, water supply expenses become negatively variable, i.e., decremental costs, and are so treated. As for the remainder of the expense accounts, the suggested method of assessing their degree of variability in response to changing traffic levels has been considered under the relevant paras. 2.03 to 2.100. 43 2.10l After long-run variable costs in terms oL 1970 prices and perfo.naace have been deternined it next becomnes necessary to convert the ficures into future costs, first by applying factors for estimated waues and maaterials price increases and second by adjusting for savings that; can be effected by dieselizatior. and other technological improve- me.nts. Thre first of these processes, viz., the conversion of 1970 wanes -evels and or;ces tc 1974 forecast levels, has been done concurrently wmth the analysis of 1.970 expenses, as shown in Appendix C, Table Cl. Tne factors on which the conversion was made are given at the end of Table C2. 2.105 The position has now 1been reached at which the cost of noving the 1970 volume of traffic, at current operating standaids and with the eq,uipment available at the time, has been calcul'ated at coE!ts expected to prevail in 1974. It now remains to assess tihe effect on future costs of pro,5ected changes in operating standards and the type of equipment in use. As a first step to this end it is necessary to analyze cost in relation to is causes, as showvn in Table 2.1. Table 2.1 FUNCTIONAL ANALYSIS OF LONG-RUN VARIABLE COSTS--HYPOTHETICAL CASE OF XYZ RAIIWAY (In thousands of dollars) Costs influenced mainly by: Passenger Freighti Total Gross ton-km (mainly track cost and depreciation) 2,553 3, 077 5,630 Train-km (dispatcher, train crews, etc.) 5,825 3,8614 9,689 Freight car-km (line maintenance of cars, depre ciation) - 6,1426 6, 426 Freight car-day (workshops maintenance) - 1,952 1,952 Locomotive-km (workshops and line maintenance) Mainline, diesel 3,074 3,522 6,596 Mainline, steam 3,355 5,599 8,954 Shunting, diesel 123 1,582 1,705 Shurting, steam 155 2,116 2,271 Railcar-km (maintenance, operation, depreciation) 1,1481 - 1,1481 Passenger car-km (maintenance, operation, depreciation) 5,030 - 5,030 Car movements in yards (yard costs excluding locomotives) 78 2,577 2,655 Freight traffic volume (documentation, handling) - 3f,849 3,849 Total long-run variable cost 21,674h 34,5614 56,238 2.106 Completing the projection of future freight traffic costs is considered first. This consideration will be based on the hypothesis, already outlined, that there will be significant traffic growth and that there will be substantial shift from steam to diesel traction and the introduction of freight cars of greater capaeity. The speed of trains and the tonnage they carry and the net load of each freight car will consequently increase. There will be marked differences in the rate of growth of ton-kmn, train-km, car-km, and locomotive-km. In fact, steam locomotive-km will be substantially reduced. To reflect the dispro- 45 7ortionate growth rate of each of the individual units of output, a series of factors is applied, expressing the projected output in 1974 as a multiple of the actual output iri 1970. For example, freight car-km in 1'974 are projected at 285 million: as compared with 240 million in 1970. The factor for multiplying 1970 costs that vary in response tc changes in car-kIn -ill therefore be 1.19. The resultant projection cf freight long-run variable costs to 1974 is shown in ^'able 2.2. Table 2.2 FREIGHT TRAFFIC COSTS--ADJUSTMENT OF LOlNG-RUN VARIABLE COSTS TO TAKE ACCCJNT OF TECfNOLOGICAL AND OPERATING CHANGE--HYPO- THhrICAL CASE OF XYZ RAILWAY (In thousands of dollars) 1970 costs Output 1974 174 Costs influenced mainly by: converted to compared projected 1974 prices with 1970 costs Gross ton-km 3,077 1.21 3,723 Train-km 3,864 1.11 4,289 Freight car-km 6,426 1.19 7,647 Freight car-day 1,952 1.04 2,030 Locomotive-km Mainline, diesel 3,522 1.71 6,023 Mainline, steam 5,599 0.50 2,800 Shunting, diesel 1,582 2.07 3,275 Shunting, steam 2,116 0.50 1,058 Car movements in yards 2,577 1.19 3,067 Number of consignments 2,797 1.22 3,413 Tons ol less-than-carload traffic 1,052 1.22 1,283 Total 34,564 38,608 Net ton-km, million 3,600 4,400 Long-run variable cost per net ton-km, cents 0.96 0.88 46 2.107 Apart from the primary objective of the costing exercise in providing a basis for rate-making, the results may also be used to show the savings in operating expenses that may be expected to accrue from investment in more efficient equipment. On the assumption that, if no investment in diesel locomotives and freight cars of higher capacity were to be made, all costs would increase proportionately to traffic growth, i.e., by 22 percent in the period of the projection, a simple calculation will indicate that operating expenses in 1974 would be greater to the extent of $3,559,000. Savings of this anount will be made possible by investment in: Diesel locomotives (freight traffic) $3,250,000 Freight cars of higher capacity $ 309,000 2.108 To return, however, to the primary purpose of the exercise, it is now possible to begin to calculate projected unit costs of oa eralon, in order to permit determination of the long-run variable cost of carrying specific commodities, either on an all-line basis, according to average characteristics of the specific traffic and its average length of haul, or for specific movements. D. INTEREST ON CAt-ITAL 2.109 Before proceeding to the calculation of unit costs, however, it is necessary to introduce into total variable costs an element for the cost of the additional investment needed to handle the growth of traffic. The cost of capital required to increase capacity or to renew existing assets is as much a part of long-run variable costs as is use- depreciation of the assets, already incorporated in operating expense. A calculation of interest on capital is shown in Appendix F, which assumes that the cost of future borrowing will be 7 percent. Consider- ation is still restricted to the assessment of long-run variable cost, and the calculation of interest in this context should not be confused with assessment of a return on the investment, the latter being a function of rate-making and not of costing. The interest calculations in Appendix F are then carried into the calculations of freight traffic unit costs as in Appendix G. Each of the unit costs calculated in Appendix G will now be discussed. 47 E. ri-B C0oJriG 6Y6TM--FR.EOIGH. TRAFF,FG--UNXT-^ CGSTS 2 .110 From an examination of the categories of cost shown in nable 2.?, the definition o-f the unit of outa-ut to be used as the basis cf calculatirng unit costs will in all cases be evident, and in most cases the number of units will be kcwn-; by reference to uhe opera'ing statistics of the railway. There are exceptions, however., and these may give rise to considerable diifficu:l-ty Ln determining the number of output units involved in a specified area of operations and the ho,Lo- geneity or variance of such units. The case of carhandlings in marshaling (classification) yards and industrial sidings is most likely to give rise to such difficulties. in Appendix B, para. 12.02, it is suggested that records of the numbers of cars handled in each yard should be maintained. Bat even if this were to be done it might not provide a full solution to the prcblem, because there sight be substantial differen^.es in the amotunt of wor' involved in particular movements because of differences in yard layouts and in distances betWeen sidings se:ved by each yard. This problem has faced all railway cost analysts and was well summarized by W.19. Stenason, Director of Economic Research, Canadian Pacific Railway,J in the following words: When the cost analyst has succeeded in analyzing the behavior of railwar operating expenses in an account, he is only half way to his goal. He then faces what is, in many cases, the equally difficult task of count4i ig the output untrits which attach to the category of traffic under analysis. To do this in respect of yard operations requires exhaustive field studies. In the case of Canadian Pacific, Yard Studies are done by a group consisting mainly of operating personnel headed by an assistant super- intendent with some familiarity in economics and cost analysis. All our yards were stratified into several groups--large yards, medium-sized yards, small yards with permanent engine assignments, and small yards in which the work is done by road engines. Yards in each of these groups were selected for study on the basis cf operating knowledge as to which yards would be representative of each class of yard. For example, all of the large yards were studied. The sample coverage declined through the medium-sized and smaller yards. 1/ "Econoipic Costing of Railway Operations," RaLlway SysteTs and Management Association, Chicago, Ill., USA, Dec. 1960 Overall, about 70 percent of all yard switching time was accounted for in the studies. A four-day sample period was selected. Tne yard ijas zoned by operating men who were familiar with its operation. Tnese zones were called elements of yard work. They were designed to reflect a homogeneous operation. Thus, if thiere were three classification areas in a yard, there would be three elements of reclassification work. Each yard transfer was treated as a separate element of switchinv, and each industrial area was treated as a separate element. In our Vancouver yard study, for example, we have over 50 elements of yard swi-zching. The procedure, then, was to count the engine time in a particular element of switching, and cars handled in that larticular element during the period of study. From this, a unit time for the element involved was derived. We are then in a position to develop for any category of traffic, once we know the routing of that category of traffic through the yard, the yard engine time which is required. WJe also tested the variability of yard expenses by relating yard engine time to cars handled in classification wozk in each of the yards studied. With these studies, we again have the data required for.a cross-section analysis, and we found that yard engine time on a cross- section basis in classification was completely variable with the traffic handled in classification. This cannot be appropriately done for other elements of yard work, since there are major differences between different yards in regard to distance from classficiation area, physical layout, and characteristics or the length of industrial sidings. 2.111 To institute special studies of yard operation in the detail described by Stenason may take a long time. For a more immediate approximation of yard unit costs a formula is suggested in Appendix H. It is believed that this formula will provide a unit cost of yard handling of acceptable accuracy for costing for general rate-making. For costing a specific consignment a more detailed study of specific car movements at origin and destination would of course be necessary. In the initial stages of costing for general rate-making it is suggested that the Appendix H fonnula should be adopted and that costs be refined later after special studies have been made along the lines described above. 2.112 A second problem may be involved in determing the number of originating consignments for purposes of calculating the unit cost of documentation in freight booking offices. In this case the difficulty may be overcome without much trouble. If no statistical record is maintained the figure should be calculated by reference to the number of machine-numbered invoices (waybills) issued by the accounts office or u,ed at stations during the relevant period. The cost until will in all cases be one consignment, the cost involved being, for all p;^actical nurposes, the same for all consignrments, irrespective of size. Therefore, for example, if the cost of' docur.entation is $1 per consiginrwent, a carload consignment of 4i) nelsric tons will on an average cost 2.5 cents a metric Ton, whereas a lez s-than-cdrload (LCL) consign- ment of 20 kilos will cost $50 a metric ton equivalent (costs fo; increments in output could be different from the average). This very wide variation will have an important bearing on the relative rates, particularly oOr LCL traffic and all traffic over short hauls. 2.113 Another item of operating expense that figures largely in the accounts classification of most railways is the cost of handling freight traffic at terminals. This cost usually comprises loading and unloading of freight cars and handling in fraigh't warehouses on receipt from and delivery to customers. Normally the service is restri cted to LCL traffic, but, where road collection and/or delivery services are offered by the railway, carload traffic may be involved as well. A further complication can arise where the railway provides railway-paid labor at cer-tain major stations only, whereas at other stations licensed contractors supply the labor and collect fees directly from customers for handling their goods. The ciY-cumstances of each case must be established, and the tonnage of traffic handled at railway expense must be determined. The cost unit will be per ton handled at origin or destination. 2.114 In the particular circunstances of particular railways, other terminal costs may arise, and costs that do not vary with length of haul, as follows: (i) Collection--per ton (ii) Delivery--per ton (iii) Port charges--per car (This charge arises where the port authority provides locomotives and other facilities in the port area and collects a fee from the railway in consideration thereof.) (iv) Repacking of LCL traffic--per ton (On some railways a number of stations in a particular area may dispatch partly loaded cars to a central point where they are repakeed according to destination station and re- forwarded as fully loaded as possible.) (v) Transshipment--per ton (This expense arises at break- of-gauge stations on railways operating over more than one gauge.) 2.115 Turning next to line-haul costs, i.e., those costs which fluctuate according to the distance the goods are carried, the units -;owhich the costs are related are clearly indicated, and the number of output units of each category will be readily ascertainable from operating statistics. The unit costs so calculated will provide the building blocks with which to construct the long-run variable costs of carriage of specific commodities according to their loadability and to their varying lengths of hav.l. The unit cost in each case will be an average for the specific function, calculated on an all-line basis or on a sectional basis, as may be considered more appropriate (see para. 2.01). 2.116 To enable the unit costs to be updated more ea:4ily they should be divided between labor, material, fuel, general expenses, depreciation and interest charges in the manner shown in Appendix I. Costs so analyzed may be adjusted from time to time to take account of changes in wages and material price levels. By further adjusting them for anticipated increases in prices they become invaluable tools for projecting future operating expenses. 2.117 In the process of determining the long-run variable cost of carrying a specific traffic it may be found that, in order to simplify the calculation, two or more of the unit costs may be amalgamated. Freight car-km and freight car-day costs must, however, always be calcu- lated separately and specifically. The two reasons for this are (a) because on many railways some or all of a particular traffic may be carried in private owners' or foreign railwuays' cars, the repair and capital costs of which are borne by the owners, and (b) there may be substantial cost variations between different classes of the railway's own cars--e.g., tank cars, hopper cars, livestock cars, boxcars, gondolas--each of which should be costed separately. 2I.118 The remainder of line-haul costs consists of track, locomo- tive, and train costs. In developing countries the scarcity of funds for investment usually means that equipment availability should never be much greater than adequate to handle the traffic offering and that, at least in the direction of greater traffic flow, each locomotive should be loaded as nearly as possible to maximum permissible capacity for the particular section of the line over which it is to operate. This situation, which would be the general rule rather than the exception, provides a convenient basis for simplifying the calculation of costs -that vary in relation to train, locomotive, and gross ton-km. Assuming, as an example commonly encountered, that thte direction of greater traffic flow is from inlanLd areas of agricaltural, forestry, and mining produc- ticn Lo tne ports, then the total .Vreigat tri-hm will be governed by .ne average capacity, in terms of gross tr^ailing tons, of t'he locomo-ives available to move traffic to the ports. In othar words the unit that explains the variability of trairn, locomotive, and track costs is the gross trailing ton-km in the direction of greater flow. If, for example, the tare weight of each boxcar is 16 tons, then line-haul costs (exclu- dcing car costs) will be the same (within measurable linits) for one car .Loaded with 40 tons of traffic as for two cars each loaded with 12 tons. ln each case the gross load is 56 tons. Therefore, if all train, loco- motive, and track costs are totaled and divided by gross trailing ton-kri, .iunit cost is derived that will give full weight to loadability and will substantially reduce the number and complexit of cost cal culations. To show how the unit cost per gross trail-ing ton-kn may be applied in rmeasuring the cost differential per net tcn-lzn a niuber of hypot'hetical e-.amples are presented in Table 2.3. Table 2.3 C(MPARIs0N OF COSTS OF CARRYING MCI4ODITIES OF VARYING LOADABILITY (Assumed line-haul costs (excluding car costs) per gross trailing ton-km, 0.226 cents, as calculated in Appendix G) Aluminum Hides and i tem hollow ware skins (dry) Groundnuts Freight-car capacity, tons 35.0 35.0 35.0 Loadability, tons 3-5 765 35.0 Freight-car tare weight, tons 16.0 16.0 16.0 Gross weight per car, tons 19.5 23.5 51.0 iatio of gross to net tons 5.57 3.13 1.46 Line-haul, cost per net ton-km, cents 1.26 0.71 0.33 2.119 If statistics of train and traffic density are maintained separately for each section of the railway system, it then becomes a sim- ple process to calculate specific costs for each section in each direction, as in the hypothetical cases presented in Table 2.4. 52 Table 2.4 FREIGHT LINE-HAUL COSTS (aCCLUD.LNG CAR COSTS) BY SECTION AND DIRECTION Section A-B Section B-C Item 6C 0 km 300 Ian (mainline) (branch) Up Down Up Down Average net trainload, tons 240 L80 150 300 Ave rage gross trainload, tons 510 750 350 500 Average gross load (including locomotives), tons 600 840 430 580 Cost per train-km Locomotive costs, dollars 0.721 0.721 0.721 0.721 Train costs, dollars 0.322 0.322 0.322 0.322 Track costs, dollars 0.348 0.487 0.249 0.336 Total, dollars 1.391 1.530 1.292 1.379 Cost per gross trailing ton-kzm, cents 0.273 0.204 0.369 0.276 2.120 With these unit costs per gross trailing ton-lm the calculation of locomotive, train, and track costs per net ton and per net ton-km can then be effected in one operation instead of three separate calculations. For example, let it be supposed that a boxcar of 16 tons tare weight is used to carry 35 tons of groundnuts from C to A and on the return journey to carry 15 tons of textiles from A to C. The calcalation of line-haul cost (excluding freight-car costs) would be as shown in Table 2.5. 53 Table 2.5 FHiiGtfT LI.NE-HAUL COST6 (.KxCLUD::IG CAP, CUSTS) FŽR $FECiFIC CFc Xi(DT=S5 Items Groundnuts Texutiles Net carload, tons 35 15 Gross load, tons 51 31 Aross ton-km 1.ainline 30,600 (down) 18,600 (up) -3ranch 15,300 (domm) 9,300 (up) Line-haul cost 1 L'ain*' i' e, c o.lLars 6 .L2 50.78 3ranch, dollars 42.23 34.32 Cost per carload, dollars 'G4.65 85.10 Cost per net ton, dollars 2.99 5.67 2.121 For the sake of simplicity it has been assumed in the fore- go4ng examples that traffic, -n terms of carloads, is evenly balanced; in other uords, that there is no empty haulage of cars. This is an oversimpliciation of the general situation. In the great majority of cases some haulage of empty cars will be involved, before or after the loaded haul. The use of the gross trailing ton-k-m unit of costs is designed to cover the cost of empty haulage, but it can do this only if the amrcunt of empty haulage involved in the mLovement of a specific consignment or comrmodity can be assessed with reasonable accuracy. On railways maintaining origin and destination statistics of carloads and tonnages received at or dispatched from each station to all other stations on the line, the balance or imbalance of any particular flow of traffic can be accurately assessed. Unfortunately such detailed infonmation is not generally available. Therefore in the majority of cases some difficulty will arise in determining the amount of empty haulage directly related to the movement of a particular commodity, except avhen such commodity requires the use of specially constructed cars. The movements of special cars, loaded and empty, can be determnined by analysis of operating statistics. Normally, 100 percent empty return naulage of specialized cars will be involved, although in certain insta.nces freight cars designec particularly for-one traffic may be adapt.ed to other uses, e.g., livestock cars for carrying kola nuts, or coal hopper cars for gypsum and limestone to cement and steel works. The major part of the vehicle fleet will, however, be open for covered freight cars designed for the carriage of a wide variety of general goods. 2.122 Nearly always it will be found that the volume of traffic in one direction measured in terms of carloads over the whole railway or any part of it will exceed the vclume in the opposite direction and that the direction of greater flow may change from season to season. it will also be found that, even where there is a marked imbalance of traffic, resulting in a high proportion of empty haulage in the direc- tion of less traffic volume, there will always be a proportion of empty haulage in the direction of greater flow. This may be caused by a number of factors, such as the reluctance of shippers of export produce to accept on the back-haul during the rainy season open cars that have been used on the forehaul for the carriage of such iterms as stractural steel, pipes, etc., or the arrival of large quantities of, say, materials for road construction at wayside stations with little to export. A further factor making a realistic appraisal of empty haulage costs _ difficult is that, when the number of freight cars arriving under load at a particular station is far in excess of the demand for cars to clear traffic origina±Ang at that station, there is a tendency to reload them to less than capacity on the return journey in order to speed up turn- around and get the cars back quickly to areas where they are more urgently needed. The resulti may be, therefore, that although there is no noticeable increase in empty car-km there is a significant drop in the average carload. 2.123 For general rate-fixing the best practical solution will be fiist to take the statistics of freight car-km, loaded and empty, up and down, on each of the main sections of the railway. Then extract from them those figures referring to specialized commodity car movements in both directions, loaded and empty, and the movements of standard-type cars allocated to the transport of specific commodities (e.g., boxcars for the distribution of cement from a large manufacturing plant). From the remainder calculate the proportion that empty car-km in one direc- tion bears to the loaded car-km in the opposite direction. This propor- tion should thenbe assumed to represent the average empty return haulage involved in the transport of all commodities other than those for which more specific data are available. ,. .;ilte rnatiely, it 1wi1l f recuently De found that, by -:csvtzg the i.oundtrip of a typical train or type of train employed on -. rzuc.ilar section of the railw,ay,, a sound basis can be established 2cr detenrining 'he ratio and the cost of mptr ha-alag-e involved in ,he movement of traffic in eitler directio2L. An a second stag-e the cosr, of enipty ha-ulage cen 'oe allocated to each cor,.odity carried over .he secuion according to the type of car used for ivs carriage and -he suitabil4ty of such cars for the speci-'ic cormmodites carried on the back-haul. To illustrate the method an example is presented in Tables J1 and J2 of Appendix J. A. FREIGhT TRA.FKEC--CCIM4ODITY COSTS 2.125 Epty return haulage will influence both freight-car and line-haul costs in the final calculation of the overall cost of carly- .nlg indi-v*id co.r;modi.t: es. A suggested form, of Traffic Cost Sheet is given in Appendix K to indicate how this and all other factors orev-iously considered mright. be applied in arriving at the total variable cost of transporting individual ccmmodities in carload lots. A second cos t sheet for trainload traffic (in "block" or "unrit" trains) is suggested in Appendix L. To complete the series of cormmodity cost calculations a pro forr.a cost sheet to determine costs at any length of haul for a particular cormnodity is shown in Appendix M. The figures produced by this calculation will provide the mrinimum basis for a rate structure for the commodity under consideration. G. PASSENGER TRAIN C'OSTS 2.126 The methodology for assessing the long-run variable cost of passenger train operation has been outlined concurrently with the discussion of freight terminal and line costs. The pro forma analysis of historic cost and its adjustment to take account of future price increases are shown in Append x C, Table Cl, and a summary of costs related to functions is presented in Table 2.1. Now it is necessary to adjust costs to take account of projected traffic growth and techno- logical change. In the hypothetical case that has been adopted for purposes of illustration, passenger traffic in terms of passenger-km is expected to increase at a rate of about 2½ percent per annum, and it is assumed that the additional traffic can be carried by existing services. The only major change 'Likely to affect costs will be the complete phasing out of steam haulage of passenger trains. The appro- priate adjustment of long-run variable costs of passenger train operation, including interest charges on capital, is made in Section I of Appenzdix N. 56 2.127 Insofar as passenger train operation is concerned the objective of the costing exercise is to separate long-run variable costs between passenger travel of each class and between mail and express services. Certain costs can be allocated directly to individual services, e.g., provision and maintenance of cars (first, second, and third class, express, and mail) or sleeping car attendants (first class only), but many costs are common to some or all of the services. A logical basiS for allocation of such costs must be established. Locomotive costs, for example, are common to all services, and the most equitable basis for their allocation would appear to be on a car-km basis or, if there are major variations in the weight of cars designed for particular services, on a gross trailing ton-km basis. As a geneial rule, however, the loads hauled by passenger locomotives are well within their maximum capacity, and a car-km division of locomotive costs has the advantage of simplicity. The cost of guards and conductors would also seem most logically to be sesarable between services on the basis of car-km, as their duties and responsibilities extend to the safeguarding of the whole train. Ticket collectors and examiners on the other hand should be cnarged against passenger travel only and separated between classes of travel prorated to passengear-km of each class. Track costs should be divided in pro- portion to car-km or, if there are significant weight variations between cars for different purposes, in proportion to gross trailing ton-km. 2.128 After track, train, and locomotive costs are allocated to each of the categories of cars on the trains, the problem remains of allocating the cost of those cars which are provided for the common and joint benefit of more than one service, e.g., brake and baggage vans and restaurant and canteen cars. Brake-van (caboose) costs are incurred for the general safeguarding of the train and should most logically be allocated in proportion to directly allocable car-km in each service (passenger, mail, and express). Baggage vans are provided for passenger service only, and their costs should be separated between classes of travel prorated to passenger-km, weighted in proportion to the baggage allowance for each class of travel prescribed in the tariff. Insofar as the provision of restaurant cars is concerned, experience indicates that in developing countries lower-class travelers prefer to take their food with them or to buy it from vendors at stopping stations. Restau- rant car facilities are utilized only by upper-class travelers, and the cost of the cars may be allocated accordingly. Many railways provide canteen cars that cater for the needs of lower-class travelers, although these cars may also be patronized by first- and second-class passengers. Costs should be allocated on the basis of dependable observation of experienced catering or operating personnel. In this connection it is normal practice to maintain a separate account for catering receipts and 57 expenses on trains, but in all knowr cases catering expenses in this context exclude the provision and operating costs of restaurant and canteen cars. In other words they comprise only the cost of providing anci se;^vicing meals, refreshrments, drinks, and other associated services. The profi- or loss on catering serv-ices should be taken as a credit or deoit to the costs of car operation before the lac.ter costs are allocated to the appropriate class or classes of -travelers who use themi. In this context it is assumed that restaurant and canteen cars are provided for the convenience of passengers, as part of the service that attracts passengers tc rail, and that the cost oI' providing them should be covered by revenue from fares, rather than from meals and refreshments. To attempt to recover car provision and operating costs through the price of meals and refreshments would doubtless inflate prices to a level that would effectively extinguish demand. 2.129 A pro forma allocation of passenger train costs is shown in Appendid . Is . H. REFINSMENT OF THE CUSTING SYSTrEM- 2.130 Having determined functional unit costs on an all-line basis (or on a regional basis to the extent that statistical and accounting data will allow) the costing office should next concentrate on a study of variations in costs as between individual sections, stations, and yards. This will entail special studies of local conditions of operation, yard layouts, train schedules, seasonal demand, traffic flows, and other considerations. A primary objective should be to ensure that, where significant variations from average costs occur, these are not due to inefficiency or inadequate cost control. 2.131 AL interesting problem is raised, for example, by traffic originating at, or destined to, wayside stations. A method of assessing the cost of shunting such traffic has been suggested in paras. 2.80 and 2.8h, and this will be representative of the cost incurred if the traffic in and out of the station is reasonably constant and evenly balanced. Where, however, underload running is involved from or to the nearest marshaling or remarshaling point a more complicated costing exercise must be carried out. The evaluation of the cost of underload train operation should presumably be based on a comparison of the gross train- load, before traffic has been set down or after it has been picked uxp at the station in question, with the average trainload in the same direction on days when no traffic is consigned to or from the station in question. The application of the unit cost per gross trailing ton-Ian (as calculated in the example in Table 2.)4) to the resultant difference in the trainload should indicate the cost of' undarload running relevant to the carloads and tonnage picked up or set down at the station in question. 2.13 The foregoing example is presented to indicate tnat the problems involved in traffic costing can be solved by analysis of the circiunstances on the railway. If the cost analyst knows his railway well he should have no difficulty in solving the problems raised by any combination of circumsetances relative to any particular traffic movement. 2.133 Projected costs should be continuously compared with actual costs and the causes of variations should be determined and analyzed. These causes may be: (i) A simple over- or underestimation of wages and material price increases in the cost projection. (ii) Cost variability proving to be greater or less than projected. It may be that costs assumed to be 100 percent variable contain in fact an element of fixed cost, e.g., in the case of workshops repair of equipment, or that the causes of variability are more complex than had been assumed. Here regression analysis may enable the derivation of a formula that will best explain variability and provide reliable projections. The combination of such techniques with the use of the computer will produce dependable results more rapidly. Extreme refinement should not be attempted until reasonably accurate costs have been determined and their character and application is fully appreciated. (iii) Actual costs having been inflated by deviations from operational performance projected or lack of adequate cost control. In this context the figures evolved by the traffic costing section could be used to identify unnecessary expense in the form of excessive use of material or expansion of the labor force. Chapter --II UNE'C ON -CiC Ll; A_D SzE.ICs$ 301- ln this context the observaticns already made in paras. and 2.25 should be borne i-. nric-. Trhe cost analyst is concerned h.ere *.ith avoidable or decremental cost, which will differ from long- run var,able cost in several ways, and particularly where common (Joint product) costs are concerned. 3.02 To illustrate this point, a study of the profitability or unprolitability of passenger train oparation is of interest. In the hypothetical case presented in Appendix N it will be seen that the future long-run variable cost of passenger train operation is estimated ^t $26 million. Assume that total revenue from passengers, mail, and e:-ress services is e!xcec:ed to meet this cost and provide a maroinal contribution to fixed costs, but that first-class passenger revenue is expected to be only $3.6 million. This is compared with long-ra variable cost of providing the services, estimated at $5.3 million, as shown at the end of Appendix N. Consideration should of course first be given to an increase in fares, but, if these are already at a level arbove wlich any further increase would merely turn away customers, it becomes necessary to consider what the financial effect would be if first-class accommodation on trains were to be abolished. A major saving would resulti from, the elimination of maintenance and operation costs of first-class passenger cars, and of restaurant cars, which are often provided mainly for the benefit of first-class passengers. In a.dditioon some savinon in track costs might be expected to result from the reduction in gross trainloads. However, locomotive costs would not be affec-ted by the elimination of first-class cars, except to the extent of a small saving in fuel consumption. Similarly, train costs would be reduced only to the extent of sleeping car attendants and other staff specifically provided for first-class passengers. Guards, conductors, and ticket inspectors would continue to be employed whether ori not first-class service were to be continued. Locomotive, train, h)rake and baggage car and terminal costs are in effect joint product costs that would be unaffected except to the minor extent mentioned earlier. 'The avoidable cost of the withdrawal of first-class service would therefore be: 60 Type of cost Amount, thousands of dollars Track costs 731 First-class car costs 1,504 Restaurant car costs 640 Locomotive costs (fuel only) 107 Train costs (sleeping car attendants only) 103 Total 3,09* * Plus or minus any loss or profit on restaurant car services. 3.03 In this case (which is typical of experience on a number of railways) it will be seen that the withdrawal of first-class service would result in a reduction in the net revenue of the railway, although on any normal basis of allocation first-class revenues are substantially below long-run variable cost. In such circumstances the continuation of first-class travel can be justified only by applying the principle of marginal-cost pricing on the grounds that the primary purpose of running the trains is to carry the preponderan.t bulk of second- and third-class passengers, together with mail and express traffic. Indeed, on many railways where the major part of the contribution to fixed charges and the whole of the return on the investment ar- provided by freight traffic, maintenance of the passenger side of the business as a whole can be justified financially only if it is accepted that the prime purpose of the railway is to move freight and that marginal-cost pricing of the passenger service is therefore admissible. There are, of course, rail- ways where passenger traffic is predominant, and on some of these it has been alleged that passenger traffic is profitable and that freight traffic loses money. This statement is presumably based on "fully allocated costs," fixed costs and overhead being distributed in some arbitrary manner. The costing of freight traffic on a predominantly passenger-carrying railway should, however, be no different from the costing of passenger traffic on a predominantly freight-carrying rail-way. The point is--what would be the savings to the railway if the service were to be discontinued? 3.011 The crucial test will come when the line, or any section of it, approaches saturation in terms of train paths. To avoid or delay the large investment needed to increase line capacity, and the increase in operating and maintenance costs the additional facilities would entail, the obvious course in the example quoted would be to take off first-class services, substitute additional second- and third- class cars, and proportionately reduce the number of passenger trains, thereby providing room for more freight trains. An actual example may be cited of a railway where line capacity was nearing saturation and an emergency arose requiring a massive increase in freight movemant. 61 .-n increase of 100 percent in passenger fares nad the expected result of halving the number of passerngers and the recuired number of passenger trains. Freight trair paths on the critical section of the line were increased boy 1r percent--a Grastic buu effective solution tnat incidenta-ly resulted in a sigi`ficant 4mproveme.-nt in net earn- ings of the railway. Th7is Gifs, course, a short-ran decision to meet an unioreseer. emergency. The long-run solution must be based on a comparison of intermodal economic Oos us. 3.05 Consideration has so far been given to cases where avoidable ccsts can be less than long-ran variable cost. In the study of the costs of specific sections of the railway the converse may be true. In branch-line operation, costs Tiill include, in addition to variable costs, the cost of maintenance of thie right of way (grass cutting, tree felling, drainage, weeding, repairs to banks and cuttings, etc.), level crossing keepers, operation and maintenance of signais and telecom"munications, bridg>e painting, building mainte- narnce, station staff, sanitation E d conservancy, and- many other costs so far classified under the heading of fixed cost. Reference to the payrolls and accounting record of section officers should readily provide the information on which to determine the costi of all these services. The unit costs of train, car, and locomotive operation over the line concerned will already be known. With these data and adequate operating statistics for the branch line an accurate total cost of operation and maintenance should be available. This total cost, which, subject to certain constraints previously considered, will become avoidable cost should the branch line be closed, may substantially exceed any previously determined lona-run variable cost. 3.06 The next step should be to compare the cost of operating and maintaining the line with the revenue earned from the carriage of freight and passengers over the line itself (i.e., excluding for the moment any consideration of the costs incurred and revenue earned on the mainline from traffic originating on or destined to the branch-line). In this context the costs have been ascertained, but determination of the appropriate revenue attribut.able to the branch-line may be difficult if there is a sharp taper in the rate structure and the branch-line is distant from the source or destination of traffic. In such cases it would appear equitable to assess branch-line revenue at the average rate per ton-hn for the complete haul. In the final outcome, however, the Justification for the line must inevitably be based on economic rather than financial considerations, and in this context costs are more significant than revenue. -.07 The origin ancl clestination on rail of all the traffic to fnHfr-m the branch line must be known in order that the revenue and .s;tno moving the traffic over the mainline of the railway may be 6?)' c5alcLlated. In this context, revenue earned on the mainline should be '-icw-: from statistics. Costs should be calculated on the basis of 2cn--nrn variable cost, in accordance with the formula proposed in lab7e . A considered judgment must then be made as to what proportion of the traffic to or from the branch line would remain on the mainline if the branch should be closed. 3.08 'With these data the ef.ect on the rail^ay's finan.ees of brainch line closure can be calculated. However, even though -t may be fiinancially advantageous to the railway to close the branch line, the cos..s of the alternative, e.g., constructing a new highway or upgrading an existing highway, together -ith the mraintenance and operating costs of road transport should be considered. 03 (Blank) Cnapter IV RATE-MAKING 4.01 To be economically justified, freight rates must be set between two limits. The lower limit is the cost of providing the service, represented generally by long-run variable cost but in certain special cases by short-run variable cost. The upper limit is the cost to shippers of equivalent service from some alternative mode of trans- port or, in the case of a monopoly, "what the traffic will bear" (see para. 4.05). It is of the greatest importance to observe that, where coinmetition exists, the services to be compared must be equivalent. It may be that for a particular haul or traffic one or another of the alternative modes will have a service advantage, by way of superior speed, door-to-door delivery, safety from loss and damage, dependable times of arrival, etc. In order to assess the practicable limits within which a rate can be set, it will be necessary to quantify the value to the shipper of the relative advantages or disadvantages of the alternatives available to him. 4.02 It is probable that in the case of door-to-door service the railway suffers the greatest disadvantage. Whereas speed of transit and dependable arrival dates are of importance for high-value goods with a quick turnover, in the case of bulk exports it is probable that a steady, dependable flow of traffic from the producing areas to the port is of paramount importance. In the case of high-value minerals, such as tin and copper, the railway may be able to offer greater security of transit. The quantification of these and many other factors must enter into the assessment of the limits within which rates may be set. h.03 It cannot be stressed too strongly that in the context of rate-making the only relevant costs are future costs, not historical cos-ts. For this purpose it is suggested that future costs should be determined on the basis of the best technology available to the railway and likely to be achieved within an appropriate time frame. To take a simple and frequently encountered example, where high-cost steam opera- tion is being converted to low-cost diesel operation, future costs for rate-making purposes may be based on dieselization in a relevant time period. This, however, is a matter of commercial strategy. Thus the costing would serve two concurrent purposes: (i) Determination of system profitability after cost- reducing investment, i.e., finding whether traffic could be handled profitably after investment in new technology. (ii) Determining, by comparison with aggregate operating cost of present technology, whether the indicated investment is justified (see para. 2.107 for- example). L .Oi4 Assuming that the railway is able to detemine it., own tariffs, .,es should oe set at the points between tne aforementioned limits Tha r, will maximize the contribution to fixed costs, and this implies the in;roduction of the principle of charging whnat the traffic will bear."t Clearly there will be many commodities of comparable loadability that, at.thou,h their long-run variable costs of transport nay be very similar, ir.ay have widely different elastici`tie-s of demar.d. Taking, for example, tin, copper, lead, and zinc, either as reLined metals or concentrates, a rate that might successful y be applied to tin or copper might, if applied to lead and zinc, severely dampen or even extinguish demand if the haul from, mine to port should be very long. The cost of providing the service merely sets the lower limit and, although the long-run variable cost of carrying a number of cosnnodities may be the same. The objective of rate- m Xking should be to charge such rates above the rminimum of the relevant -an variable cost (keeping in view the competitive situation and elasticity ot demand) that would, taking into account all traffic together, recover ,he fixed costs and secure an adequate return on investment. 4.05 Estimating the volume of traffic that might move at ary given zevel of rates and the effect on net income is a key aspect of pricing. This vital function should be primarily a managerial responsibility, sub- ject only to regulation as to maximuw rates and to legal rules against unjust discrimination. In certain circumstances, however, it may be in the overriding interests of the economy of the country that certain rates should be set so as to maximize the volume of traffic moved rather than the contribution to fixed costs. In general rates should not be below the apptopriate long-run or short-runi vari-able cost, except for sound economic reasons, wshen Government might provide specific subsidies. 4.06 The basic essentials for sound rate-making are therefore: (i) Market research, writh the objective of assessing the potential market for rail service. (ii) A thorough knowledge of the characteristics of rail service and of railway costs. (iii) Even more importantly, a thorough knowledge of the service characteristics and costs of the railway's competitors. 66 APPENDICES Page No. A. Proposed Classification of Operating Expenses 68 B. Proposed Statistical Presentation 80 Operating Statistics 85 Traffic Statistics 98 C. Railway Traffic Costing of XYZ Railway, Converting from Steam to Diesel Locomotives 109 Table Cl. Pro Forma Analysis of Operating Expenses 109 Table C2. Projected Statistical Data to 1974 113 Table C3. Depreciation of Fixed Assets, 1970 114 D. Formula for Separation of Mainline Locomotive Crew Expenses Between Services 115 E. Formula for Separation of Mainline Locomotive Fuel Expenses Between Services 117 F. Interest Charges on Capital 118 G. Freight Traffic Unit Costs 119 H. Formula for Calculating Carload Shunting and Marshaling Costs 120 I. Analysis of Freight Traffic Unit Costs 124 J. Empty Return Haulage Costs and Commodity Costs from Average Round-Trip Costs 125 K. Freight Traffic Cost Sheet for Carload Traffic 128 L. Freight Traffic Cost Sheet for Trainload Traffic 130 M. Freight Traffic Cost Sheet for Calculation of Long-Run Variable Cost at Varying Lengths of Haul 132 N. Pro Forma Separation of Costs of Passenger, Mail and Express Traffic 133 0. Analysis of Long-Run Variable Costs for a Railway - an Actual Case, 1971 136 67 Appendix A PROPOSED CLASSIFICATION OF OPERATING EXPENSES iOT_: Under each primary head of expense three subheads should be maintained for staff costs, materials, and general expenses, resoectively. Heading numbers do not correspond to paragraph numbers in text; there is no relation. I Maintenance of Way and Works (Civil Engineering Department) 1.01 Superintendence (Civil engineers, draftsmen, quantity surveyors, and the like, and their office staff) Maintenance of Permanent Way 1.02 Supervision (inspectors and foremen) 1.03 Irack maintenance--labor 1.04 Maintenance of roadbed and right of way--labor 1.05 Rails 1.06 Sleepers 1.07 Ballast 1.08 Other track material 1.09 Maintenance of track machinery 1.10 Small tools and supplies 1.12 Depreciation, write-off, and amortization of track- Maintenance of Works 1.20 Supervision (inspectors and foremen) 1.21 Bridges, culverts, and tunnels 1.22 Offices, stores depots, and general buildings 1/ On many railways depreciation of all fixed assets, including track, is segregated in a separate head of account at the end of the classification of operating expenses. 68 1.23 Passenger station buildings 1.24 Freight station buildings 1.25 Wayside stations and other trackside buildings 1.26 Locomotive workshops and running sheds 1.27 Freight car workshops and depots 1.28 Passenger-car workshops and depots 1.29 Hospitals, clinics, and first aid posts 1.30 Power plant and transmission lines 1.31 Water supplies 1.32 Fueling plant--coal 1.33 Fueling plant--diesel 1.34 Telecommunications 1.35 Signals 1.36 Roads, level crossings, fences, and drains 1.37 Sanitation and conservancy 1.38 Office supplies and minor equipment 1.39 Miscellaneous expenses General 1.40 Vacations2/ 1.41 Medical and hospital services 1.42 Accident benefits and sick pay 1.43 Indemnities and miscellaneous concessions to staff 2/ It is more general practice to charge vacation pay to the primary account that bears the charge for the employee's wages or salary. Costing is thereby simplified. Where there is special reason for accounting separately for vacations the costing section will find it necessary to apportion the accumulated charge to the various relevant subheads of expense on some logical basis related to the leave eligi- bility of the various grades of staff involved. 69 Ii Equipment Maintenance_! (Mechanical Engineering Department) 2.01 Superintendence (mechanical engineers, works superintendents, and the like, and their office staffs) 2.02 Locomotives--Steam--Mainline 2.03 Locomozives--Steam--Yard 2.04 Locomotives--Diesel--Mainline 2.05 Locomotives--Diesel--Yard 2.06 Locomotives--Electric--Mainline 2.07 Locomotives--Electric--Yard 2.08 Railcars--powered units 2.09 Freight cars--workshops repairs 2.10 Freight cars--line maintenance 2.11 Passenger cars--workshops repairs 2.12 Passenger cars--line maintenance 2.13 Railcar trailer units--workshops repairs 2.14 Railcar trailer units--line maintenance 2.15 Ballast cars 2.16 Business and inspection cars 2.17 Other works equipment 3/ This Classification of Expense assumes an organization under which the Mechanical Engineering Department is responsible for workshops maintenance of locomotives and workshops and line maintenance of passenger and freight cars. Running shed maintenance of locomotives is the responsibility of the operating, i.e., Transportation Department. 70 2.18 Depreciation, wit rawal, and amortization of locomotives and rolling stock- 2.19 Workshops machinery 2.20 Power plant machinery 2.21 Wlater supply machinery 2.22 Depreciation, withdrawal, and amortization of machineryk 2.23 Office supplies and minor equipment 2.24 Miscellaneous expenses '.2' VacationsA/ 2.26 Medical and hospital services 2.27 Accident benefits and sick pay 2.28 Idemnities and miscellaneous concessions to staff 4/ See footnotes to Maintenance of Way and Works. 71 i1.1 Traffic (Co-mnerc::al Department) 3.01 SuDerintendence--freight 3.02 Superintendence--passenger 3.03 Co-mmercial agencies--freight 3.04 Commercial agencies--passenger 3.05 Publicity--freight 3.06 Publicity--passenger 3.07 Market research--freight 3.08 Market research--passenger 3.09 Office supplies and minor equipment--freight 3.10 Office supplies and minor equipment--passenger 3.11 Miscellaneous expenses--freight 3.12 Miscellaneous expenses--passenger 3.13 Vacations--freight-/ 3.14 Vacations--passenger5/ 3.15 Medical and hospital services--freight 3.16 Medical and hospital services--passenger 3.17 Accident benefits and sick pay--freight 3.18 Accident benefits and sick pay--passenger 3.19 Indemnities and miscellaneous concessions to staff--freight 3.20 Indemnities and miscellaneous concessions to staff--passenger 5/ Soo footnote 2/ to Maintenance of Way and Works. 72 IV Transportation (Operating Department) (See note under heading II Equipment NMaintenance) 4.01 Superintendence (all grades above statioranaster or agent, locomotive running shed foremen, and the like, and their office staffs) 4.02 Train dispatchers 4.03 Station staff--passenger 4.04 Station staff--freight 4.05 Station staff--common passenger/freight operations 4.06 Station supplies 4.07 Yard staff--passenger 4.08 Yard staff--freight 4.09 Yard locomotive crews--steam--passenger 4.10 Yard locomotive crews--steain--freight 4.11 Yard locomotive crews--diesel--passenger 4.12 Yard locomotive crews--diesel--freight 4.13 Yard locomotive crews--electric--passenger 4.14 Yard locomotive crews--electric--freight 4.15 Yard locomotive fuel--steam 4.16 Yard locomotive fuel--diesel 4.17 Yard locomotive power--electric 4.18 Yard locomotive water--steam 4.19 Yard locomotive water--diesel 4.20 Yard locomotive lubricants--steam 4.21 Yard locomotive lubricants--diesel 4. ' Yard locomotive lubricants--electric 73 4.23 Sundry materials for yard locoino-ives--steam 4.24 Sundry materials for yard locomo.ives--diesel 4.25 Sundry materials for yard locomotives--electric 4.26 Running shed repairs, yard locomotives--steam 4.27 Running shed repairs, yard locomotives--diesel 4 28 Running shed repairs, yard locomotives--electric L'4.29 Sundry materials for yard oreration 4.30 Mainline locomotive crews--steam--passenger 4.31 Mainline locomotive crews--steam--freight 4.32 Mainline locomotive crews--steam--mixed 4.33 Mainline locomotive crews--steam--departmental 4.34 Mainline locomotive crews--diesel--passenger 4.35 Mainline locomotive crews--diesel--freight 4.36 Mainline locomotive crews--diesel--mixed 4.37 Mainline locomotive crews--diesel--departmental 4.33 Mainline locomotive crews--electric--passenger 4.39 Mainline locomotive crews--electric--freight 4.40 Mainline locomotive crews--electric--mixed 4.41 Mainline locomotive crews--electric--departmental 4.42 Mainline locomotive crews--railcars 4.43 Mainline locomotive fuel--steam--passenger 4.44 Mainline locomotive fuel--steam--freight 4.45 Mainline locomotive fuel--steam--mixed 4.46 Mainline locomotive fuel--steam--departmental 4.47 Mainline locomotive fuel-diesel--passenger 4.48 Mainlinte locomotive fuel--diesel--freight 74 4.49 Mainline locomotive fuel--diesel--mixed 4.50 Mainline locomotive fuel--diesel--departmental 4.51 Mainline locomotive power--electric 4.52 Railcar fuel 4.53 Water for mainline locomotives--steam 4.54 Water for mainline locomotives--diesel 4.55 Lubricants for mainline locomotives--steam 4.56 Lubricants for mainline locomotives--diesel 4.57 Lubricants for mainline locomotives--electric 4.53 Lubricants for railcars 4.59 Sundry materials for mainline locomotives--steam 4.60 Sundry materials for mainline locomotives--diesel 4.61 Sundry materials for mainline locomotives--electric 4.62 Sundry materials for railcars 4.63 Running shed repairs, mainline locomotives--steam 4.64 Running shed repairs, mainline locomotives-diesel 4.65 Running shed repairs, mainline locomotives--electric 4.66 Running shed repairs, railcars 4.67 Train crews--passenger 4.68 Train crews--freight 4.69 Train crews--departmental 4.70 Restaurant, canteen, and sleeping car attendants 4.71 Sundry train materials-passenger 4.72 Sundry train materials-freight 4.73 Sundry train materials--general 4.74 Signalmen and level crossing keepers 75 4. 75 Telecomrmunica.ions 4.76 General office expenses &.77 Miscellaneous expenses 4.78 Derailments and accidents 4.79 Claims and losses--passengers and baggage 4.80 Cla:Ims and losses--freight 4.81 Vacations-6/ 4.82 Medical and health services 4.83 Accident benefits and sick pay 4.84 Indemnities and miscellaneous concessions to staff 6/ See footnote 2/ to Maintenance of Way and Works. 76 V Express (Parcels, Collection, and Delivery Services) 5.01 Superintendence 5.02 Booking and handling staff 5.03 Commissions 5.04 Train staff 5.05 Operation of equipment 5.06 Maintenance of equipment 5.07 Depreciation and withdrawal of equipment-7/ 5.08 Office supplies 5.09 Claims 5.10 Miscellaneous charges 5.11 Vacations8/ 5.12 Medical and health services 5.13 Accident benefits and sick pay 5.14 Indemnities and miscellaneous concessions to staff 7/ See footnote 1/ to Maintenance of Way and Works. 8/ See footnote 2/ to Maintenance of Way and Works. 77 vi Administration DEpartrr.ent The form of this abstract or classification should be designed in such detail as besc suits the need of the administration concerned. It may, for example, be desired to separate the different depart- ments, e.g., general management, finance, purchasing and store- keeping, personnel, etc. Che following list is suggested as a minimum. 6.01 Officer grades 6.02 Office staff and workmen 6.03 General office expenses 6.04 Data processing 6.05 Audit 6.06 Legal 6.07 Police 6.08 Traini:Lg 6.09 Welfare 6.10 Maintenance of motor vehicles 6.11 General charges 6.12 Vacations-:- 6.13 Medical, hospital, and health services 6.14 Accident benefits and sick pay 6.15 Indemnities and miscellaneous concessions to staff 9-/ See footnote 1/ to Maintenance of Way and Works. 78 VII Pensions, Gratuities, and Provident Fund 7.01 Pensions 7.02 Gratuities 7.03 Provident Fund 7.04 Other retirement benefits, not accounted for elsewhere 79 Appendix B PROPOSED STATISTICAL PRESENTATION The determination of traffic cost is often made more difficult by inadequate statistics of operating standards, equipment utiliza- tion, and traffic patterns and flows. The problem may ba further complicated by confusion as to the meaning of certain statistical terms, for example, train locomotive-hour and train-hour. ThFe follow- ing list has been prepared as a guide to the optimum provision of data suitable generally for traffic costing purposes and also as a test of operating performance and efficient equipment utilization. Definitions are included where experience has shown that doubt exists regarding the interpretation of certain statistical tenns. The value of statistics depends on their quick and regular pre- sentation. The objective should be to complete then within the month following that to which they refer. They should provide comparative figures for the various regions, divisions, districts, or sections of the railway's organization, so that regional differences might be clearly indicated and corrective action be taken where necessary. Distribution of statistics should therefore be wide enough to reach all supervisory officers on the line to enable them to assess the relative effectiveness of their efforts and to engender a competitive spirit between regions. Statistics should be concise but in suffi- cient detail to indicate suddan changes or definite trends in operat- ing and traffic characteristics. Determination of the detailed causes of such variations may well require reference to supporting data in the statistical office but the fact of their existence should be established by the summnary presentation, which, it is suggested, might take the following form:* A. Operating Statistics 1. Definitions 1.01 Train 1.02 Light locomotive * The outline presented is also a complete table of the contents of this appendix. 80 1.03 Passenger train 1.04 Mixed train 1.05 Freight train 1.06 Departmental train 2. Basic Statistics 2.01 Train-hours 2.02 Locomotive-hours 2.03 Locomotive-lat 2.04 Net and gross trailing ton-km 2.05 Train-km 2.06 Vehicle-km 2.07 Passenger-km 2.08 Number of freight vehicles loaded 3. Derived Statistics 3.01 Train-km per train locomotive-hour 3.02 Train-km per train-hour 3.03 Freight net t6n-km per train locomotive- hour 3.04 Freight net ton-km train-hour 3.05 Gross trailing ton-km per train locomo- tive-hour 3.06 Net freight trainload 3.07 Gross trainload 81 3.08 Ratio of gross trailing ton-km to net ton-kmn, freight traffic only 3.09 Average number of vaehicles per train 3.10 Percentage loaded to total freight car-km 3.11 Average load per loaded freight car 3.12 Average number of seats and passengers per train, and seat occupancy ratio B. Traffic Statistic;3 4. Basic Statistics 4.01 Commodity tomnages, net ton-km, and revenue statistics 4.02 Revenue-earning and service traffic 4.03 Number of passengers and passenger-km 5. Derived Statistics 5.01 Average length of haul 5.02 Average revenue per ton-km 5.03 Average passenger journey C. Equipment Utilization Statistics 6. Basic Statistics 6.01 Locomotives in stock, under repair, and in use 6.02 Freight cars in stock, under repair, and in use 6.03 Passenger cars in stock, under repair, and in use 82 6.04 Locomotive failures 6.05 Freight car hotboxes 6.06 Passenger car hotboxes 7. Derived Statistics 7.01 Locomotive-km per day per mainline locomotive in stock 7.02 Locomotive-km per day per mainline locomotive in use 7.03 Locomotive-hours per day per mainlin6 locomotive in use 7.04 Percentage of locomotives under or awaiting repair 7.05 Locomotive availability and utilization ratios 7.06 Locomotive-km per locomotive failure 7.07 Percentage of freight cars under or awaiting repair 7.08 FrAight car-km per freight car-day 7.09 Net ton-km per freight car-day 7.10 Freight-car turnaround days 7.11 Number of hotboxes per million freight car-km 7.12 Percentage of passenger cars under or awaiting repair 7.13 Passenger car-km per vehicle-day 7.14 Number of hotboxes per million passenger car-km 83 D. Staff Statistics 8. Basic Statistics 8.01 Number of men enployed 8.02 Staff costs 9. Derived Statistics 9.01 Productivity in traffic units per man en-ployed 9.02 Staff costs per man employed 9.03 Indices E. Fuel and Lubricant Statistics 10. Basic Statistics 10.01 Fuel consumption and cost 10.02 Lubricant consumption and cost 11. Derived Statistics 11.01 Fuel consumption and cost per locomo- tive-km 11.02 Fuel consurption and cost per 1000 gross training ton-km 11.03 . Lubricant consumption and cost per 100 locomotive-km F. Miscellaneous Statistics 12.01 tmwnber of consigments 12.02 Number of freight cars shunted 12.03 Other statistics A. OPERATING STATISTICS 1. Definitions 1.01 TraiLn. A train consists of a conventional locomotiva attached to one or more freight- or passenger-carrying vehi cles, with or without brake van. In the case of passenger railcars, a single powered-car with passenger accommodation is th3 snallest train unit. 1.02 Light locomotilve. A light locomotive is a locomotive zrmning with or without brake van but with no passenger or freight-carr-irng vehicle attached. 1.03 Passenger train. Any tra-n booked in the Working Timetable to specifically as a passenger train shall be allocated in the basic statistical data to passenger service. in the event o 7reight or railway service vehicles being attached to passenger tra-ns, the final analysis should reallocate passenger train-km and hours to passenger, freight, and departmental service in proportion to the vehicle-l-n run on passenger trains for the benefit of each respective service. 1.04 Mixed train. Any train booked in the Working Timetable to run as a mixed passenger and freight train should be allocated in the basic statistical data to mixed service. In the final analysis Lmixed train- km and hours should be reallocated to passenger, freight, and departmnental services in proportion to the vehicle-km run on mixed trains for each respective service. This formula should be adopted only for general costing purposes and is only valid for application in tne costing of specific trains on those railways where in the normal course there is sufficient freight traffic available to make up all mixed trains to the permissible, or at least average, load for the particular class of locomotive used. On most railways it will be found that mixed trains are run on sections where passenger demand is too small to justify an entire passenger train and where there is occasional, but possibly small, freight traffic. When costing such services, freight costs should more appropriately be calculated on the basis of the marginal cost of adding each freight vehicle up to the maximum permissible load of the locomotive. 1.05 Freight train. Any train run specifically for the carriage of public freight. Freight trains will on occasion carry vehicles loaded with railway service traffic. In the final analysis freight train-lmo and hours should be reallocated to freight and departmental services in proportion to the vehicle-km run on freight trains for each respective service. 1.06 Departnental train. Any train run exclusively for railway service, e.g., ballast train, breakdown train, or train loaded exclu- sively with railway fuel or materials. On many railways the train-km and locomotive-km run by ballast trains are calculated at some nominal prescrioed rate, say 15 kph for each hour durin whic1h thi train is in section. This somewhat arbitra-ry metho6 can be misleading, as on many occasions the traLi will be stationary at ballast quarry or on the site of reballasting. On railways where such a 'asis is used, train-hours or locomotive-hours, where appropriate, afford more depandable costing units than train-km or locomotive-kRm. 2. Basic Statistics 2.01 'rrain-hours. A period of 1 hour during- which a train is on line, the total hours to count from the time the train starts from its originating station to the time it comes to a stop at its destination, but excluding any time spent by the train engine shunting at wayside stations, as required and authorized by the local stationmaster and supported by his signed authorization. It is suggested that the basic statistical data for computing train-hours should be extracted from the drivers' record, to which should be attached the Operating Department's authority for wayside shunting and other delays en route. In this way a comprehensive analysis of locomotive usage can be obtained. Alternatively, train- hour data can be extracted from the guards' or conductors' train documents, but in this case the results should be reconciled with the locomotive-hour statistics provided by drivers' records in order to assure that documents are received for all journeys and that none is omitted. As driverst records are normally required to be submitted in support of claims for mileage and overtime allowances, it is unlikely that any of these will fail to be prepared and submiitted. Train-hours should be classified by type of traction and service, as follows: Type of traction Service Steam Passenger Diesel Mixed Electric Freight Railcars Departmental 86 2.02 Locomotive-hours (a) Train locomotive-hour. A period of 1 hour spent in traffic by one powered unit when assigned to train-haulage duty, the total hours to count from the time the locomotive leaves tne locomotive shed at the originating station to the time it arrives at the locomozi:ve shed at its destination, but excluding an- tLme spent by the locomo-ive shunting at wayside statIons under Traffic Depar;anent authority (see Train-locomotive shunting, next section). Data should be extracted from the drivers' work r-ecords and should be classified as follows: Type of traction Service Function Steam Passenger Principal train-engine Diesel Mixed Assisting required Electric Freight Assisting not recuired Railcar Departmental The difference between train-hours and train locomotive-hours will, of course, consist of the following elements: (a) time spent by the train locomotive (or locomotives) in traveling from locomotive shed to passenger station or freight yard at originating station and from station or yard to shed at destination station, (b) time that may be lost if loading and marshaling of the train has not been completed prior to arrival of the train locomotive or locomotives, (c) time required for coupling up and examination of train, and (d) in the case of double or onultiple heading there will be two or more train locomotive-hours to each train-hour. Even where there is little double heading of trains the difference between train-hours and train locomotive-hours can be corsiderable, particularly if there is slack or inefficient working in depot svations 87 and te=rminais. Statistics 7i' idC`cat,; thn r.ee_ foa investigation -nto such cases. (See also Derivec StaalstiCs, e.g., net ton-kil pe- train-hour, net ton-han per train locomotive-hour). (b) Shunting locomotive-hour. There are tw^o categories of shunting operations, viz.: (i) Yard (permanent) shunting. Yard shunting locomotive-hours will count from the time the locomotive leaves the shad until it returns thereto. For traffic costing purposes it is essential tc determine the propo--tion of yard locomotive-hours employed respectively on freight and passenger service. Experience indicates that thls deter- mination will nornally req-wire a soecial study of operatiors at each yard. It is recokmended that, wherever practicable, the yard locomotive driver should be required to indicate on his work record the tines during which the locomotive is employed handling freight and passenger vehicles respectively. (ii) LTra n- I _ :r'tie ^hunUn.u0 r.an-r rai ways it is cormon practice for the train-locomotuive of a mixed or freight train to pick up or set down vehicles at wayside stations. Time so spent, in excess of either the time allowed for the station in the Working Timetable or a prescribed minimum, e.g., 10 minutes, is classified as "train-locomo- tive shunting-hours" and deducted from train-locomotive- hours and train-hours. The entry in the driver's record is usually supported by a form of authority issued by the stationmaster. Train- locomotive shunting-hours will, in all but exceptional cases, be allocable to freight service. (c) Other locomotive-hours. Other locomotive-hours are generally incurred by light locomotives, as defined, for purposes of balancing power, proceeding to the site of accidents, returning from banking duties, etc. WJherever possible they should be classified by the service (passenger, mixed, freight, or departmental) for the benefit of which they were incurred. (d) Total locomotive-hours. These should be summarized as follows: Passenger) Train engine hours, including Mixed ) assisting required and Freight ) assisting not .required Shunting - permanent (diVided if possible between passenger and freight) Shunting - train locomotives Other locomotive-hours - Total 2.03 Locomotive-km. A distance of 1 kIn run by one powered uxit under its own power. In the case of mainline operation the number of kilo- meters run should be the actual measured distance from origin to destination, including the distance between locomotive shed and station or freight yard at each end of the run. In the case of yard operation, or of a train locomotive shunting en route at a wayscde station, shur.ting- locomotive-km should normally be calculated at a nomLnal rate, for example, 10 kph. In a few cases, where locomotives are fitted with recording instruments, actual shunting-km are shown in statistics. Whichever method is used should be indicated clearly in statistical presentation. Locomotive-km should be classified in the basic statistical records by type of traction, service, and function as follows: Type of traction Service 2unction Steam Passenger Principal train-locomotive Diesel Mixed Assisting required Electric Freight Assisting not required Railcars (power units only) Departmental Light running Shunting Yard shunting Train-engine shunting Difficulty usually arises in allocating yard shunting to indivi- dual services. Only in exceptionally large stations would yard loco- motives be allocated specifically to passenger train marshaling. Generally the yard locomotives would be employed mainly on freight duties and would shunt passenger vehicles only as required. Experience indicates that special studies of terminal operations may be needed to determine the relative proportions of yard shunting time that should be allocated to the various services. It is recommended, however, that where possible the yard locomotive driver should be required to indicate on his work record the hours spent on handling vehicles of each service. The basic documents should be the drivers' tickets, or work record, by whatever name it may be called locally. Reconciliation should be made at the end of each statistical period to ensure that for each mainline driver's record there is a corresponding guard's or conductor's record, and vice versa. 89 2.04 Net and gross trailing ton-km. For the purposes of operating statistics, as distinct from traffic and commodity statistics, the basic document should be the train records maintained by the guard or conductor of each train. These documents in all observed cases show at the head the date, train nrumber and designation, locomotive number or numbers, locomotive and train crews' names, maximun pen'mIssible load for the section and locomotive(s), and a-y othae data relevant to the specific train. The body cf the document provides a separate line for each vehicle on the train, as follo-ws: Number and code of the vehicle Station of origin Destination Brief description of contents Net load Tare weight of vehicle Gross weight Totals show the net, tare, and gross -4eicrht of the train. Vehicles cut off at intermediate stations are so indicated; vehicles picked up at intermediate stations are added; and in either case the total weight of the train is amended accordingly. These documents provide the simplest a:nd quickest means of determining net and gross freight ton-knm, up and down, by district and section, by freight or mixed trains, and by type of traction (steam, diesel, or electric). Passenger train gross ton-km and the passenger proportion of mixed train gross ton-km. are similarly determined, including the assessed weight of passengers and their baggage, according to the formula evolved by each particular railway. The same documents provide also the data for determining train-km and vehicle-km, as follows: 2.05 Train-km. A distance of 1 km run by one train. Total kilometers run should be the actual distance between stations of origin and destination and should not include any shunting movements in terminals or at wayside stations en route. Train-km should be classified by type of traction and service, as follows: 90 Type of traction Class of Service Steam Passenger Diesel Mixed Electric Freight Railcars Departmental The basic document should be the guard's or conductor's journal, or train document, by whatever name it is called. To ensure that all basic documents have been received and recorded, a reconciliation should be made at the end of each statistical period with the train- locomotive-km extracted from drivers' records. 2.06 Car-Im. A distance of 1 km run by one nonpowered vehicle. On some railways where the vehicle fleet is composed of large proportions of four- and eight-wheeled vehicles, the unit employed is the vehicle- unit-km, a bogie vehicle being classified as two units, a four-wheeler as one unit. The classification of car-km by type of vehicle is a matter for decision by individual administrations. The degree of detail is often decided by the need for basic data for future investaent decisions relative to the intensity of use of each type of existing stock. On railways having computerized car control the basic statistical data will include individual car numbers. For purely traffic costing pur- poses the aim of satistics should be to produce separate figures for all classes of vehicles having differences in operating and maintenance costs, ;.nd in operating characteristics, such as variations in capacity and versatility of use. The following classifications of car-km is suggested as a minimum: Coaching stock Freight stock Passenger-carrying cars Tank cars Mail cars Hopper cars Express cars Livestock cars Railcar trailers Other special user cars Other public-traffic vehicles Gondolas Service vehicles Boxcars Brake vans 91 Where private-owners' and foreign railways' cars are operated over the administration's lines, separate statuistics should be maintained for such cars. The basic car-km records should also include an indication of the type of traction, service involved, wnether loaded or empty and direction of travel, as follows: Type of traction Class of service Status Direction Steam Passenger Loaded Up Diesel Mixed Empty Dowin Electric Fre-ght Railcar Departmental 2.07 Passenger-km. Passenger-hm statistics are probably the most neglected of all railway statistics. On some railways they are not maintained at all; on the great majority of railways passenger-km are determined on an all-line basis, but not by district or section. It follows therefore that, whereas it should be possible to compare costs and revenue o' passenger services on an all-line basis, the profitability or nonprofitability of particular passenger services or sections cannot be ascertained except as a result of special studies and samplings, because of the lack of any basis for geographical allocation of revenues. The ultimate simplcity in ascertainment of total passenger-km is found on railways where fares are calculated at a basic fare per km; in such cases all that is necessary to determine total passenger-km is to divide total revenue for each class of travel by the basic fare per km for that class of travel. Where, however, there is a distance taper in the fare structure this simple method cannot be used. On the majority of railways in developing countries it is usual to require stationmasters to submit, in support of their station accounts, a statement (daily, weekly, or monthly) of passenger tickets issued, showing opening and closing numbers of each series, the number of tickets issued to each station, the fare, and total revenue. These statements should provide the data for determining total passenger-km and, when appropriately analyzed by route and direction, for preparing a passanger traffic density and flow chart similar to that prepared on most railways for freight traffic. The infonmation so provided would be important for operating as well as costing and commercial decisions. 2.08 Number of freight cars loaded. Figures are compiled from tele- communicated advices from stations. On railways having connections with other lines it is essential that loaded freight cars received at interchange stations should be included in the statistics of freight cars loaded for purposes of calculating turnaround time. 3. Derived Satistics 3.01 Train-km per train locomotive-hour. Figures should be presented by district or section for each type of traction and by services as fo'lows: Passenger Mixed Freight Total--all public traffic services The equation is as follows, taking passenger service as an example: Passenger train-km i passenger train locomotive-hours including assisting required and assisting not required The resultant figure represents the productive work, expressed in kilometers traveled by one train, performed on average during every hour by one train locomotive assigned to the relevant service. 3.02 Train-km per train-hour. This figure represents the average speed of trains of each service, from originating station to destination, excluding only time spent in authorized shunting en route. Figures should be presented by district or section for each type of traction and by services as follows: Passenger Mixed Freight Total--all public traffic services There may be substantial differences between these figures and those of para. 3.01, for the reasons outlined in para. 2.02(a). The causes of the difference should be analyzed and understood. 93 3.03 Rreight net ton-km, er train loco-a:ctive-hoar. This figure represents the productive work, expressed in terms of net tons moved the equivalent of 1 kn, perfonmed on average in the course of every hour by one locomotive assigned to freight or mixed service. Although no single statistic read in isolation can 'oe depended on to provide a valid conclusion, it is probable that, in the circumstances of most railways in developing countries whe-re there is reserve line capacity and where freight Js the pi-edcminant traffLic, the iire o net -ton-km per freight train locomotive-hour is the most vital of statistics. Figures should be presented by district or section for each type of traction and by services as follows: Freight Mixed i'reight and freight proportion of mixed Mixed train locomotive-hours should be proportioned to freight in the ratio that freight car-lr. hauled on mixed trains bears to total car-hr hauled on mixed trains. The figure for freightt trains is the most important and, except on railways having a relatively large number of nixed services, and where mixed trains are not well used for freight, there is unlikely to be a significant difference betw-een the first and third of tuhe figures indicated above. It is important, however, to indicate clearly in any specific context whether the figure being used is for freight trains only or for freight plus freight proportion of mixed trains. 3.04 Freight net ton-km Der train-hour. These figures should be presented by district or section, by type of traction, and for freight trains, mixed trains, and freight plus freight proportion of mixed trains in similar meanner to freight net ton-km per train locomotive- hour as outlined in the previous paragraph. In the present case the figures, which are, of course, a function of average train speed and net load, will assume prime importance on railways where line capacity is intensively utilized. Within the con- straints imposed by load, speed, drawgear, and train-length limits the objective should be to achieve that combination of power, speed, and load that will optimize net ton-km per train-hour, even though this may result in a reduction in other efficiency statistics, such as train-km per train locomotive-hour or average net trainload. Taking an example from actual experience, a reduction of 15 percent in average trainload on a certain railway made possible a 25% increase in average train.speed, thereby theoretically increasing the capacity of the line by 6.25 per- cent. As a further illustration the following hypothetical comparison of the effects of single or double-heading trains is submitted: 94 No. of Net train- Train-km Train-km Net ton-km Net ton-km locomotives load, tons per train per train per train- per train per train hour loco-hour hour loco-hour 1 300 20 18 6,000 5,h00 2 400 25 20 10,000 4OOo On such a railway, if it should be important to increase line capacity and there should exist a sufficient reserve of locomotive power, the decision would be to double-head, thereby increasing line capacity by 6 2 percent, other things being equal. On the other hand, if the track should have ample spare capacity but the locomotive fleet be inadequate to meet demand, it might well prove preferable to single- head and thereby obtain 35 percent more output per locomotive. In -Dractlce -there would be several other factors o-L a technical, operatingr, and financial nature to be taken into consideration, but for simplicity's sake these will not be discussed at this point. 3.05 Gross trailing ton-Ian train locomotive-hour. Whereas in the last two paragraphs the figures have been concerned with the measurement of work done for the movement of freight traffic, in the present context the purpose is to measure the output of locomotives in terms of gross tonnage moved, including the weight of the vehicles themselves, whether loaded or empty, passenger or freight. The figures should be calculated by dividing gross ton-km by train locomotve-hours, by district or section, for each type of traction, and by each class of service, as follows: Passenger Mixed Freight Total--all public traffic services The significance of the figures is discussed further in para. 3.08. 3.06 Net Freight trainload. Figures are derived by dividing total net ton-Ikn by train-km. They should be presented by district or section, for each type of traction, and by services as follows: Freight Mixed Freight and freight proportion of mixed If possible, without excessively complicating the presentation, figures should be given separately for each direction, up and down, particularly for sections having a marked imbalance of traffic. 3.07 Gross trainload. Figures are derived by dividing total gross trailing ton-km by train-km, by district or section, for each type of traction, and boy services, as follows: Passenger M-ixed Freight Total--all public traffic services 3.08 Ratio of gross trailing ton-km to net ton-km, freiaht traffic only. This figure is derived by dividing total freight gross trailing ton-km (freight and freight proportion of mixed trains) by total freight net ton-km. The resultant ratio is of course a function of: (a) Average net load per loaded freight car. (b) Average tare weight per freight car. (c) Percentage loaded to total freight car-km. A ratio in the region of 2.0 is frequently encourntered indicating a ratio of net load to tare weight of loaded cars of about 1.5 and of loaded to total freight car-km of about 70 percent. Any reduction in the ratio that can be achieved will indicate a reduction in the pro- portion of unrroductive deadweight tonnage, with consequent reduction of costs and/or increase in earning capacity per unit of wor]k done. 3.09 Average number of cars per train. Figures should be presented for passenger, mixed, and freight trains separately, as follows: (a) Passenger trains: Passenger-carrying Other coaching cars Freight cars (if any) Total For costing purposes it would be desirable to subdivide passenger- carrying cars between the various classes of travel and other coaching cars between mail, parcels (i.e., express), restaurant cars, brake and baggage vans, etc. Such a breakdown can usually be made from the train composition t-ables in the Working Timetable and for purposes of swnmarized statistical presentation need not necessarily be included. 96 (b) Mixed trains: Passenger-carrying Other coaching cars Freight cars--loaded -- empty Total These figures Will provide the basis for detemnining the relative passenger and freight proportion o± mixed train-kla and hours. (c) Freight trains: Loaded cars Elapty cars Brake van Total 3.10 Percentage of loaded to total freight car-km. The calculation should exclude brake van-km. A low ratio (say of the orcer of 60 percent) usually indicates a high preponderance of bulk mineral, agricultural, or forestry traffic emanating from areas of low population density and little other economic activity, leading to a high imbalance of traffic. On the other hand a high ratio does not necessarily indicate a well- balanced traffic flow. It may, for example, result from a situation in which freight cars are arriving at a port or other center of business activity with heavy loads and in exceptionally large numbers and are being returned lightly or part loaded to speed turnaround and incidentally provide better service to customers. Such a situation would be characterized by a high percentage of loaded to total car-k and a relatively low average carload. In practice it may frequently be found that exceptionally high average carloads coincide with low ratios of loaded to total car-km, and vice versa. 3.11 Average load per loaded freight car. The figure is derived by dividing total freight net ton-km by total loaded freight car-kmn The alternative method of dividing total originating tonnage by total freight cars loaded, the latter figure of which depends in large measure on telecommunicated messages, has been found to be less accurate 97 and to ''ail to account properly for road vans loaded and unloaded en route from mixed trains and local freight trains. To continue tuhe line of inquiry started in para. 3.10 it would be useflul "or both operational &nd costing purooses to state average carloads separately in each direction, up and down, by district or section, and even more so to break the figures down into c2'asses of cars as previously outlined in para. 2.06. 3.12 Ayerage number of seats and passengers per train, and seat occupancy ratio. It is unlikely that basic train documents will provide sufficient data to calculate tne average number of seats per train. Reference will need to be made to train composition tables in the Working Timetable and to tables of rolling stock types and capa:city; from these a standard table of seat-Ian based on the current timetable can be calculated, to be amended if and when changes are made in the timetable. The average number of passengers per train is of course the prnduct o'l total passenger-1an divided by passenger train-k. plus passenger proportilon of mixed train-baa; the seat occupancy ratio is of course the ratio that the average number of passengers per train bears to the average number of seats per train. As is pointed out-in para. 2.07, passenger statistics are often a neglected field. If they could be established by districts or section, or better still, by indi- vidual service, a major step would have besn taken toward providing adequate data for management decisions in both the operating and financial fields. B. TRAFFIC STATISTICS 1. Basic Statistics It.Ol Commodity tons, net ton-kmn, and revenue statistics. Basic data should be extracted from the audit or accounts office copy of freight invoices or waybills received from stations and should be coded to provide the following information: Date Rate Station from Haulage charge Station to Other charges (siding, Distance in kilorneters terminal, local haulage, Vehicle class or number port charges, etc.) Commodity Net ton-km Weight of consignment 98 On railways where computers are used,the computer should check the rate and charges against the entries made by station staff; in this way the costly and time-consuming processes of the revenue audit office, which is a feature of so many railway accounts departments, can be avoided. The computer will also, of course, calculate net ton-Ian. Ln the latter context it is to be observed that the statistics under consideration are primarily intended for analysis of traffic and revenue patterns and flows. A quicker and more direct method of determining net ton-Ikn for operating purposes has been considered under Operating Statistics, para. 2.04. Normally it will be found that the operating statistics will show a slightly higher figure for net ton-"a than the total cf net ton-km by individual commodities extracted from the waybills or invoices. The latter documents show the actual weight of each con- signment to a fraction of a ton, whereas the train documents will usually state the weight of the contents of each vehicle to the nearest higher round figure in tons. If, for example, the average load per loaded vehicle is 20 tons, it is likely that the net ton-Inm extracted from the train documents will be about 2½ percent than the comDarable figure e:ctracted from the waybills or invoices. The difference is within acceptable limits of statistical variance and is of no practical signi- ficance as long as the contexts in which the figures are used are not confused. Commodity statistics should be prepared as speedily as possible (it is suggested within 30 days of the end of the month to which they refer) and in a sufficiently summarized form to make them easily assimilable. On smaller railways -~here statistics have been and in many cases still are prepared manually, simplicity of presentation is essential. With the advent of computers a tendency has developed toward excessive detail--the list of commodities has been extended and each commodity is analyzed by dispatching and receiving stations. Although such information is essential for an understanding of long-range traffic patterns, flows, and densities, and the consequential demands for operational facilities and commercial action, the amount of detail is too confusing to enable management to observe and react quickly to sudden changes or persistent trends. A summary, quickly produced in the form of an abbreviated list of principal commodities, should be an essential feature of a sound statistical program. The summary should show carload and less-than-carload traffic separately. 4.02 Revenue-earning and service traffic. In this context the terms "revenue-earning" and "service" traffic are used on the assumption that all railway material and fuel are carried free-of-charge to the railway itself. It is appreciated that a small number of adminis trations charge 99 nominal rates to tneir o,rn user departments for the earriage of railway materials, more commonly where such materials are for new construction or Lor capital works generally, but also in a few instances for revenue- account fuel and material also. WIhatever the situation may be, railway service traffic should be segregated, in terms of both tons and ton-km. The basic accounting forms should enabla this to be done w- thout difficulty. L.03 Number of -assenger and passenger-km. The number of passengers carr-ied is a basic statistical figure, universally published. So far as is known., however, the figures refer only To paying passengers and do not include railway staff traveling on free passes with their families o;n leave, transfer, duty, etc., nor dc they normally differentiate between public traffic and railway staff traveling at substantially reduced fares. It should be a simple matter to include this additional analysis. 'The problear of deterinIinig passenger-hk has al;*eady been discussd in para. 2.07. 5. Derivated Statistics 5.01 Average length of haul. The figure is derived by dividing net ton-ham by originating tonnage and should be stated for revenue-earning (public) traffic and railway service traffic separately. 5.02 Average revenue per ton-kom. The figure is derived by dividing total revenue from mainline haulage (i.e., excluding terminal, siding, local haulage, and other miscellaneous charges) by total net ton-km. Commodity statistics will show a separate figure for each principal category; general statistics will show the average for all freight, excluding railway service freight. 5.03 Average passenger journey. The figure is derived by dividing passenger-km by number of passengers, for each class of travel and for all classes combined. C. EQUIF4ENT UTILIZATION STATISTICS 6. Basic Statistics 6.01 Locomotives in stock, under repair, and in use. Statistics will be maintained in as much detail as to class and type of locomotive as 100 management may consider desirable, but an syim.arr they sho-C.1 be pres3ated by type of traction as follows: Steam Diesel Electric Railcars Steam, diesel, and electric locomotives should further be subdivided -n-o mainline and shunting services wherever the locomotives are specifi- cally designed for one or other of such services. The statistical presentation is suggested as follows: Number Percentage Locomotives in fleet 100.0 Under workcshops repair: For scheduled repairs For miscellaneous repair Stored in bad repair Loc-omotives in traffic Under repair in running sheds Locomotives available for lse Spare Stored in good repair Locomotives in use The number of locomotives in use should be further subdivided between operating districts or sections of the railway. On some railways the status of each locomotive is recorded on an hourly basis; on. others the basic unit is a day of 24 hours. In the latter 6ase if, for example, a locomotive is released from workshops at any time during a particular day it is classified as "in traffic" and not "in -workshops" for that day. Similarly if it is employed on train or shunting duties during any period of a particular day it is classed as "in use" for that day. It will be classed as "spare" for one day only if it remains on the shed from 0.00 to 24.00 hours. Availability and utilization ratios are based on the percentage that the days avail- able or in use bear to the total days in the month. The mathod has the advantage of simplicity and has been shown from experience to give a fair picture of the efficiency or inefficiency of locomotive utilization. Although it is usual on most railways to find a small reserve .margLn of locomotive power held to meet emergencies, which reserve consequently gives rise to some "spare" locomotivesfrom time to time, the classification "stored in good or bad repair"l will be applicable only on railways witr. recurrent and exceptional large peak traffic, or where a railway .s Lr, the course of conversion from one type of traction to another, when there 101 rfmay oe a - 7 oar,;- surDlus oi' zlie re;la ced -ype, which, because o' e,pected traffic growth, it may aot oe coas-oaered desirable to dispose of ixrnnediatelv. 6.02 Freight cars in stock, under re-air, and in use. The repair oosition is normally advised to headquarters by telephone or telegraph at a specified time each morning by all workshops and line maintenance depo-s (sick lines). The monthly average is the mean of all the days .in tihe :nonth and uhe average for the year is the mean of all the days in the year. On a railway haaving no interconnections witL other linas the presentation becores simply: Nmiiber- ?ercentage Tlotal cars in fleet 100.0 Under or aw.aiting repair Total cars in traffic In all cases, figures should be inclusive of both railway-owned cars and private owners' cars (if any). In the case o;- aL railway stith int>erchange traffic the position should be shown as f ollows: Number Percentage Railway-owned cars on line (a) Private owners' cars on line Foreign railway cars on line _ Total cars on line 100.0 Under or awaiting repair Total cars in traffic on own lines Railway-owned cars on foreign lines (b) Total railway-owned cars in fleet (a) + (b) 6.03 Passenger cars in stock, under repair, and in use. Statistics should be the same as for freight cars. 6.04 Locomotive failures. The total number of failures for the month should be advised by the Mechanical Engineering Department, with separate figures for each type of traction, as follows: S team Diesel Elect.ric Railcars 102 6.C$5 Freight car hotboxes 6.06 Passenger car hotboxes. These figures should be advised monthly by the Mechanical Engineering Department. 7. Derived Statistics 7.01 Locomotive-km per day Der mainline locomotive in stock. One figure should be calculated for each type of traction as follows: Steam Diesel Electric Railcars The calculation should of course be carried out as in the follow- ing fraction, taking steam as an example: Total stema ma-nline locomotive-._cn (Average number of mainline steam locomotives in stock x number of days in month) 7.02 Locomotive-km per day per mainline locomotive in use. In this case figures should be calculated for each type of traction and on railways where locomotives are assigned to specific districts or sections, for each district or section separately, as well as for the whole railway. 7.03 Locomotive-hours per day per main-line locomotive in use. Main- line locomotive-hours will normally be total locomotive-hours less permanent shunting-hours, except in cases where shunting locomotives make occasional trips on the mainline, for which adjustment of loco- motive-hours should of course be made. Locomotive-hours per day in use should be calculated for each service (passenger, mixed, freight, departmental) and, where lo6omotives are assigned to specific districts or sections, for each such district or section separately. The latter may be possible in respect of steam-operated or electrified sections, but in the case of diesels it is usually more economical and efficient to run the locomotives through more than one district on the same day, so that geographical statistics may not be feasible. 7.04 Percentage of locomotives under or awaiting repair 103 7, 0: Locomc,ive availability afid rawos.rati.zaaon Bh-,h of these fig ures can be otaiaLJned directly from the statis-ics of locomotives in stock, under repair, and in use (see para. 6.01). Locomotives under or awaiting repair shDuld include those "stored in bad repair," it any. 7.06 Loc c &i-i u7r Ier locoMotive 2afureI. iguxes should be presented for each type of tractio., by district or section, for mainline ard shunting locomotives separately. 7.07 Percentage of freight cars un"der or a-.stin, repair. This figare is obtained directly fro.m -che statement of' 1reight cars in stock, under repair, and in use (see para. 6.02). 7 .038 Freight car-l!n per fre-ght car-day. Two figures should be pre- sent-e4 on an all-line basis for freight cars in stock and -in use. Tne f:``ference between them will of course reflect the ratio of cars under . >:.a: ..L. grenaiz- as ca tcuati:ed underL para. 7.07. Tie a-verage car- !; per car-day will be the average ci WiGely diff'eren`t periorances Dy each of the various classes of freight vehicles in the fleet. For example, an average of 80 car-km per day per freight car in use was found to be compounded of figures as low as 20 km per day for cars in departm ental service and over 200 km per day for specialized cars such as tank cars and cattle cars. For purposes of costing and estimation cI future car requirements it would be extremely useftul to maintain statistics separately for each class of freight vehicle suggested in para. 2.06. 7.09 Net ton-ki -Der freight car-day, Two figures should be calculated, on an all-line basis, for freight cars in stock and in use. The cal- culation should of course, be as follows: Total freight net ton-Ion (1) Average number of cars (a) in stock) x number of days (b) in use ) in the month As a cross-check on the accuracy of the various statistics involved, it is suggested that the following calculation should also be made: (2) (car-kI. per) (average carload,) (percentage loaded to) (car-day ) x (loa&ed cars only) X (total freight car-kr.) (para. 7.08) (para. 3.11) (para. 3.10) whLcn should, of course, produce the same result as in (1) 104 7.i1C Freight-car turnaround days. An all-line figure should be calculated as follows: Average number of freight cars in use (para. 6.02) x namber of days in month Number oL freight cars loaded in montb (pa-a. 2.08) If it should be possible to 1egre,gate carloadings intio the varicus classes of' freight car suggested in para. 2.06, the resultant turnaround times for each class of car woulc pro-vide valuable operating and costing information. 7.11 Number of hotboxes per million freight car-km. The method of calcu'lation of this indicator of maintenance standards is self-evident. The figure will be greatly influenced by the relative proportions of vehic'es fitted with friction and roller bearings. 7.12 Percentage of passenger cars under or awaiting re'air 7.113 Passenger car-hm per vehicle-da,y 7.2L4 Number of hotboxes per million passenger car-Im. The sane con- siderations and calculations will apply as in the case of :'reight cars. D. STAFF STATISTICS 8. Basic Statistics 8.01 Niumber of men employed. Because staff costs represent so large a proportion of total railway operating costs it is essential that accurate staff statistics should be maintained in order that past trends of productivity and costs should be clearly understood and that thereby the probability of future trends might more dependably be assessed. Un- fortunately it is too often found that staff statistics are prepared inaccurately and illogically, possibly by staff who are unaware of the purpose and meaning of the work. For example, the staff strength may be quoted as the number of approved posts in the establishment instead of the number of persons holding those posts, or as the total number of names on the payroll, even although many of the persons named there- in may have been employed for only part of the payroll period. The average number of men employed during any period should be the total of all personnel employed throughout the period plus the appropriate fraction of the period in respect of all staff who worked for only part of the period. 105 Having determined the total numoer of rien employed, the next step is to differentiate between staff employed on normal operations and maintenance ard those employed on capital works, whose wages, salaries, and allowances are charged to suchr capital works. It is Thrther necessary, on railways cperawrig a.ncillary services, to sub- divr ce the labor ftrce as between the variou.s activities cf the en-rerprise, as foll ows: Nmnber of men emplcyed: Adr,-nistration, operations, and maintenance: RaLlway Road transport Hotels and catering Inland water transport Ferries Docks and harbors etc. etc. Capitai develotiment (and rene-als char.geld to capital acc3t-out) Total ____a_1 8.02 Staff costs. Costs should be analyzed according to their aature. They should refer to revenue account charges only and should be sub- divided between cash remuneration for services rendered (take-home pay) and costs of other benefits such as medical, health, and hospital services; accident and life insurance; pansions and provident fuind contiibutions; and the like. Costs should be given for the railway service in the following suggested form: Wlages and salaries Overtime mileage and other allowances paid in consideration of work performed House and other allowances paid in cash Bonuses (Christmas and national holidays), vacations, and other cash benefits _ Subtotal, "take-home" pay Medical, health, and hdspital services Accident pay and insurance Education and welfare services Pensions and provident fund contributions, indemnities, and other retirement benefits Other items Total staff costs 106 9. Derived Statistics 9.01 Productivity in traffic units per man employed. Total traffic units are the sumi of total net ton-kIn, revenue-earning and service (para. 2.04), and passenger-kIm (para. 2.07). It is sometimes contended that a case exists for weighting 'the net tonr-kmn as against the passenger- km, but experience has adduced no evidence in suppo. of this view; in fact on many railways it would seem that the additional worik involved in freight train operation, as ccmpared with passenger train operation, after making full allowance for work in freight terminals, is _ess than proportionate to the much higher load of freight trains (in terms ol net tons) as compared with passenger trains (in terms of passengers) and that a case may well exist on some railways for weighting passenger-in as against net ton-km. Taking an overall view, however, the definition of traffic units as the sum of net ton-kon and passenger-km should make possible a fair indication of productivity -rends on any specified railway. In this context the figure will, of course, be derived by dividing tctal traffic units by the nuLnber of imen employred on rail-way adrninistra- ticn, operation, and maintenance only (see para. 8.01). 9.02 Staff costs per man employed. Figures should normally be calculated for take-home pay, other staff costs, and total staff costs separately, but where any individual and important element of cost tends to fluctuate disproportionately to other costs it should also be shown separately. 9.03 Indices. In order to facilitate aDpreciation of the relative trends of staff costs and productivity it is suggested that indices be established for a past period of at least five, preferably more, years, and on the basis of a particular year of normal operation. By such means it can be observed if productivity growth has kept pace with increased costs. If, as is probable, this is not the case, a further series of indices should be introduced, by applying the consumer price index as deflator, to show the increase in real wages and other staff costs relative to the increase in productivity. In this comparison, it is to be hoped, productivity will show the higher growth rate. B. FUEL AND LUBRICANT STATISTICS 1(. Basic Statistics 10.01 Fuel consumption and cost.e Figures should be prepared for coal, fuel oil (for diesel locomotives and railcars separa7cely), and electric power. 107 IC.C2 ILubricant consumsption and cost. As there are so many types of . ibricar,t hard and soft greases and oils for various purposes) a list of equivalents will need to be established by technical officers for quantitative comparisons of stear, dciiesel, and electric traction. 11. Derived Statistics 11.01. Pu3 con-suxm-tion and cost per loco.m.otive-krm. F,gures should be presented by type of tractiion, for mainline and shunting locomotives, and by district or section. 11.02 Fuel const2mption and cost per 1C00 gross trailing ton-km. Tnese figures should refer to mainline operation only and should be prepared for steam, diesel, electric, and railcars and by district or section. 11.03 LubDricant consvnmotion and cost per 100 locomotive-km. Figgures 5'nou I r,r es*:snted by trpe of traction, :or manine and shunting separately, and by district or section. F. MISCELLNTEOUS STATISTICS 12.Q1 Number of consigrment. This is not normally a figure included in statistical presentation, but at least one railway publishes the information, which is of great value for costing freight office salaries and expenses. The cost of documenting one consignment will be the same, whether it consists of a nunmber of full carloads or a fraction of a ton. 12.02 Number of freight cars sh-anted. This is a figure not maintained on any known railway in any country in which the Bank operates, but one that would be of inestimable value for the costing of yard expenses. Some railways record the number of cars received at and dispatched from depot stations, but except at dead-end terminals it must be assumed that many cars move through intermediate depots in trainloads requiring no remarshaling or shunting. Daily advice from stations, of cars handled in the yard, could probably be introduced without difficulty on most railways. If this could be done, other statistics such as "cars handled per shunting locomotive-hour" would provide useful costing and operating efficiency indicators. 12:.03 Other statistics. The foregoing list omits some statistics maint.iined to suit local conditions and is not intended to be exclusive. 108 A -'I' F. F.FA 2al,,toFiAtlOr~ of Flit-~ an( FlarIc~ ~ ~ ~ ~ ~ ~ ~ - d, d"I 13 1,012 '0 .10 1) 16 - 72 SiFpc.clntr.cd..occ i 247 I (1 ' ' 32 11 ntrrsnc,---(atoy (.93 5 V04 ~ 1 .13 3'.7LI t (FlIt 206 0 ~ ~~~~20, ~ ~~~~'.(2' ~ ~~~~~ ~~~~~~~~~~~~~~7) Smallsapplist tools cod 04 0t FF - , I i Id I I,~~~~~~~~~~~~IA 3II ( ci'flao.:sooro' 'iIi of aok, la0 2.Ftl.clop' -td t('oc(311 0 ,88. 14i"ling plant 'ill,00 D I0 00 I 40 - Sitaogvai,ntto,,..,-1, 100, 10 310 V8 0 -- trout, Iro-iFli'.Itiral croon'to. 'r,~o~ ISO t.vlThiV di-t y -).bl-a IVi-o'Ja-toc '4i,laC.-- y-F .d 1020 -- 1070 n~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ I1, 3,213 nOD403% 3'.? 'jI'6 1''~~~~~~~~~~~~~0i etrnanr.t'l ('Ont nnCAlt'Il:a..'(!l 60 . las... car. 100 F - lIasiernsjonpectint car:and ~~~~~~~~~30)IV 20 'ic roorks eqalnneni ~~~ ~~~54 ~~~~~1 00 ~~~2405 IF 5 9441723 4~~~~~57n~~~500 SarA ~~~~~~~~~n&reIV 0 4,J0 nort 2~~~~0n~~~nl 11'40 72 4 l'al,orp20'~~~~~~~'. l 'tor -ippl, alnr 70 17'0 4 o1- OrtiA ' Of 't,ia '. no, ''1,Ime .selr 'I. 30 4I2 Snprrincnn0.'nce ~~~~~~IV ~~~~.75 ~~~~~~4034 20 5 loal-1 area 93 an Mpt iA -233 '.12 2I tnporincc'ndennn ~~~~~~~~0v ~~~.10 ~ ~~~1,210I IL 'l.7 I'S. tra Inn nrpl 542 ;IV 0 , 2.,,` , tar'. pal2 12007 ~ ~ 1 ~ ~~~~~~~~~~~~~~.0'1 1.'' tic'In, -trts' I Iii' I 4rt1 A:',nr far r,.I t,,r!nntIo" -tlI' 1 .1) llt I'2I Ia,I,riraetsioooa--'tlenrl Ia? yardI~~~~~~~~~~~ l~4I1.00 'I 241I I -'Ar.'t,~~~eonaiiae,, ~ ~ ~ ~ ~ ?22 C .::0 ?2 (Il 239 1.100 20) Ilninline laerns,n,nei-reo,--dleas.I~~~~~1,500 3 :'('a I,s .) ~ 00 1340 .114 2,1090 313 2.071 900 Ia,,L,.,i fr--r' 14.1.1 AI,t 304 ,0 133' 0 II I IIe tn,letIA' 'i' Ie1' oar lIr C., e , tin I ,l inted. 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I11 1 1I AAll liln'1IIUl 0!i1illil 4L~~~~~~101)Tl II(II I5T r1/1',i> All J CYt z itC ue*s!r:-lr 111I All 1019s retuz l tOl tA'l Cls q If 1: A P: AM IRW1I; - III ~ ~ 79~~~~~~~~~~~~~~~~~~~~~~~~~~~~~O'~ ~ ~ ~ PU Al; OSI$f t. ea1sO30'i .F ,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~7 rt- LsT s~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0' ib; uf a(l l ,\((Al I LS u, qb~~~~10 (10,1 9 S1s DJldlli;J][ Vd~~~~~~~~~~~~~~~~~~~A Et tJ ;; it ) l>l) i A;4] (lt =vow E t=e-@1o1''1< AAII.Jt.tIItltl}BMOWI [ zS iS I | u/ E | (}S} i\t1 <)t/ ~~~~~~~~~~~~~~s (' a(11 oixs^uose L~~~~~~~~~~~~~~~~~~~~~~~(1"7 9 II5( nzr l 'e-~~~~~~~~~~~~015 ! L b IIU ' £ \c; o 0 s,vlIq IT ;f - ar Ile B!.,Az s I"o u;r ,l 0_ 4 fsatuuxa~~~~~~~~~~~~~~~~~~~~~~~~~~IL6 axq! lcx I leTlrA w eK <) vAn - __ _ ,1t; Sq!Jt\ .1S ...... So1.D.>l7rJR{VtIlJ..illr,...ve-'or-l~ - r.-v _4 - rv - . .4-~ ~ ~ ~ <<0 :, ~~ ~ ~ g8~ -0 or it -~~~~~~~~ 2 j I ~ ~~~~~~~~~I .- I I Table, 42 1 970 (1 501,ia- 3 1l)74 I ra (f P,,r.i .-t Fr ight-- t,,,as(000) I11.00,0 11,500 1 2,333 1' 13 DODr~ t- -tanS.,(mi Ion)I 3 ,600 3,900 4.0 4 .(10 I'a .seers - no (000) 15,400 I 6O 15,600 1,9K) 1 20D) --pass-kn (mtlIio,n) 1 ,900D 1.053 2,31. 100 S,tat I ,s Freight (tons) 300r 300 3 r 2 330 Passenger (em,) 190i lq5 2Y21 IralIn-k (00)O Freigh 2,0 12 6 67 12D,9 . a 13,33 3 P(nsenge~r 1000 1,0O0" IO,,~?_1 I DSPw) Dcya r tent al11 7 20 720 7'3 75n L,~ 1 ~~ ~ ~ ~ ~ ~ ~ ~ ~2,0 3,3P. 7 2 3,6 'I 632L .catZI L me- (COO)) Fre igh t 6,400 65,400 5 , 3 200 passenger 4,000 4,000) 2 .090 1oo tPaP.rtneaneo 600 600o 631,400 - Shunr in? 2,560 2,5E0 24&'I, 0 1 260 (at a3 ~~~~~~~ ~~~~~~~13,560 ~~~~~~~~~~~~~13.56000,3 4 Req Sre ' oht 6,600 7 00o,nV a.,-are6,1I0)f 6, !:1 ' (0(1 12'1'1. ~aatmo(a 0 0 Shunt ing 1,600 L,6 ) 2,1~ 3,310 ToLto 14,400 11,620 16,94-, 2602,)f aICom-tis-kr per asoam per locmmotiee- Ir. sa(flPP,) St e-r F-eigh: 73 73 70 3 Passenger 69 988 Departmrental 5 50 50 Sh-moC6Ig 40 40 LO40 Frei ght 210 11 11 Passenger 300 ISO719 VeeDor tnen tal 50 50~ 5 ) 5n Shim~ tng ~ ~ ~ ~ ~ ~ ~ ~ S 48~~4 N;.f lmantivs I, stack:- Freight 398 39 16F Passena;*r 46 _'6 De pa r t.nem rat 12 12. P. Sh-aring 61 1 32 Total In one 210 712 0 86 Spare 571 15 15 1' 6 Under repair 25'1 75 75 6i V TotL1 In stock 300 302 2V 122 Diesel, in ose: Freight 17 50 781 B passenger 34 34 >_56 Departn.ental 2 3 3 7 Shontlng 33 33 69 Total in one 116 120 15 5 213 Spare 5% 7 7 1 C, 13 Under repair 15% 22 23 5 40 Total in stock 145 150 1 9. 266 Freight ear-km per car-day In use 20 70 73 7~80 Overage carload, looted ears only (toss) 211 20 20J.5 2 21.5 Plercentage loaded to total ear-km 25 25 747'72 Percentage of earn tinderrepair 8 8 5 Total cars required 10.211 13,730 10.782 1 10,2 5so Freight ear km (.illions): Loaded 1S0 190 i95 20)5 Em Pty 60 63 69 7 6P0 Total 240 253 264' 7- 25 %n, of curs Loaded (000) 5455 975 Sb0 (rihter-dam~s in use (000) 343 3,6141A 3,51?6h Ca.rtiirnar.mord time (days) 6.3 6.3 5.9 Crass ra-Sn, (mliglmr-otios re~Ight (ml8n ,660 0l,300 0,%1$10,690 Passenger (million) 5,000 5,003 5 035 5C r20 5 010 Toatn (million) 13,660 14,3,13 11,00 5 1552700 Price indices: Im.portedmaterial 100c 105 110ii 1 22 Fuel 100 I00 l016 I3% 12 Consumer Prices 100 106 310I 4 1 20 (lagesand salaries 100 115 117 I 3Ž 133 Table C3 DEPRECIATION OF FIXED ASSETS, 1970 The purpose of the study is to determine the value of all the resources consumed in carrying traffic at any given future level. Deprecia- tion is therefore calculated on the basis of equipment usage and replacement value as follows: Rails and Fittings 80 lb, $20,000 per km, laid in track. Service capacity 200 million gross ton. Depreciation $.0001 per gross ton-km (including locomotives) 1970 Passenger 5,000 mgtk* $500,000 Freight 8,860 mgtk = 886,000 Total 13,860 mgtk = $1,386,000 Sleepers Timber, 1400 per km = total 6,720,000 Cost per sleeper, laid in track $3.20 Total replacement value $21,504,000 Estimated average service life 15 years Depreciation due to wear and tear under traffic (engineer's assessment) 10% Total annual depreciation S1,434,000 Due to traffic $ 143,400 Locomotives -- Mainline Diesel 1800 hp $300,000. Estimated life 3 million km Depreciation per km $0.10 Locomotives -- Mainline Steam As steam locomotives are to'be replaced by diesels in the ratio of about 2:1, depreciation of steam locomotives is assessed at $0.05 per km Locomotives -- Shunting Diesel 1000 hp $180,000 Estimated life 133,000 hr = 1,330,000 km. Depreciation per km $0.14 Railcars Cost per unit $200,000 Estimated life 2,400,000 km Depreciation per km $0.083 Freight Cars Average cost $15,000 Estimated life 1,000,000 km Depreciation per kmn $0.015 Passenger Cars Average cost $80,000 Estimated life 2,000,000 km Depreciation per km $0.04 * Million gross ton-km. 2.14 Appendix D FORMIULA FOR SEPARATION OF MAINLINE LOCOMOTIVE CREW EXPENSES BETWEEN SERVICES (Hypothetical figures for XYZ Railway) (Steam) Mainline locomotive crew expenses (000 units) Salaries, overtime, etc. 1,500 Kilometrage allowances 532 TOTAL 2,032 Train locomotive-hours (000) Total Assisting Manned hours locomotive- Locomotive 7 hours hours (unmanned) Passenger 100 - 100 18.2 Freight 271 - 271 49.3 Mixed 120 - 120 21.9 Departmental 40 - 40 7.2 TOTAL 531 - 531 96.6 Train locomotive shunting-hours (000) 19 3.4 Total mainline locomotive-hours (manned) (000) 550 100.0 Mainline locomotive-km (000) Total Assisting Manned % km (unmanned) km Passenger 3,000 - 3,000 27.1 Freight 4,910 - 4,910 44.2 Mixed 2,400 - 2,400 21.6 Departmental 600 - 600 5.4 Train locomotiving shunting 190 - 190 1.7 TOTAL 11,100 - 11,100 100.0 Allocation of crew expenses Salaries, Kilometrage Total (000 units) overtime, etc. allowances Passenger 273 144 417 Freight 739 235 974 Mixed 329 115 444 Departmental 108 29 137 Wayside -hunting 51 9 60 TOTAL 1,500 532 2,032 115 Allocation of mixed cost between passenger and Freight Vehicle-km Crew expenses on mixed trains % ($000) (000) Passenger 9,250 41.7 185 Freight 12,950 58.3 259 TOTAL 22,200 100.0 444 Train-km (000) Passeenger 2,970 Freight 4,600 Passenger proportion, 1,CO0 Mixed 2,400 Freight proportion 1,400 Departmental 600 TOTAL 10,570 Train-km (000) % Passenger and passenger, proportion of mixed 3,970 40.0 Freight and freight proportion of mixed 6,000 60.0 TOTAL 9,970 100.0 Allocation of departmental cost between passenger and freight (000 units) Passenger 55 Freight 82 TOTAL 137 Final allocation of mainline locomotive crew expenses (000 units) Line-haul Passenger 657 Freight 1,315 Wayside shunting 60 TOTAL 2,032 116 Appendix E FORMULA FOR SEPARATION OF MAINLINE LOCOtDTIVE FUEL EXPENSES BETWEEN SERVICES (Hypothetical figures for XYZ Railway) (Steam) Total mainline locomotive fuel expense (000 units) 1653 Deduct: Train-locomotive shunting (Total train-locomotive (Fuel consumption (Cost per shunting-hours) X per X litre) locomotive-hour) 19,000 100 litres $0.011 21 LINE-HAUL FUEL EXPENSE ($000) 1,632 Gross trailing ton-km (million) % Passenger and proportion of mixed 1,516 30.3 Freight and proportion of mixed 3,284 65.0 Departmental 240 4.7 TOTAL 5,040 100.0 Allocation of line-haul fuel expense (000 units) Passenger (30.3 x 1,632) 495 Freight (65 x 1,632) 1,059 Departmental (4.7 x 1,632) 78 TOTAL 1,632 Allocation of departmental expense (000 units) Passenger ) Percentages as in 31 Freight ) Appendix D 47 TOTAL 78 Final allocation of mainline locomotive fuel expense (000 units) Passenger, line-haul (495 + 31) 526 Freight, line-haul (1,059 + 47) 1,106 Wayside shunting 21 TOTAL 1,653 117 Appendix F INTEREST CHARGES ON CAPITAL (Track, Locomotives, and Rolling Stock, Hypothetical Case of XYZ Railway, 1974 projection) Annual interest @ 7% per annum averaged over life of assets (000 units) Passenger Freight Total 1. Track Rails, 4,800 km @ $20,000 per km 1,008 2,352 3,360 Sleepers, 6,720,000 @ $3.20 x 10% 23 52 75 TOTAL 1,031 2,404 3,435 2. Locomotives, mainline Diesel, 180 @ $360,000 910 1,358 2,268 Steam, 77 @ $100,000 - 270 270 3. Locomotives, yard Diesel, 86 @ $200,000 48 554 602 Steam, 46 @ $60,000 8 89 97 4. Freight cars, 10,250 @ $16,050 - 5,758 5,758 5. Passenger cars, 890 @ $96,000 3,018 - 3,018 6. Railcars, 75 @ $240,000 630 630 7. Turnouts Yards, $2,000,000 6 64 70 Mainline, $400,000 6 8 14 TOTAL 5,657 10,505 16,162 Appendix G FREIGHT TRAFFIC UNIT COSTS (Hypothetical case of XYZ Railway, 1974 projection) Long-run variable No. of Cost per cost units unit Operation Unit (000 units) (0o0) ($) 1. Documentation Consignment 3,413 1,900 1.80 2. Handling, LCL traffic Ton handled, 1,283 214 6.00 origin and destination 3. Yards Car movement 7,050 1,520 4.64 Add: Interest on capital Locomotives 643 .42 Turnouts 64 .04 Total, yards 7,757 5.10 Block trains = 4-1/2 units Train movement 22.95 4. Wayside shunting Car movement 350 55 6.36 Block trains = 4-1/2 units Train movement 28.62 5. Track costs, etc. Gross ton-km 3,723 10,680,000 .00035 Add: Interest on capital (including loco- motives) 2,412 .00023 Total, track etc. 6,135 .00058 6. Train costs Train-km 4,289 13,333 .322 7. Locomotive costs, mainline Diesel Loco-km 6,023 11,300 .533 Add: Interest on capital 1,358 .120 Total, diesel 7,381 .653 Steam 2,800 3,200 .875 Add: Interest on capital 270 .084 Total, steam 3,070 .959 Average, steam and diesel -10,451 14,500 .721 8. Track, train, and locomotive Gross trailing costs combined ton-km 20,875 9,240,000 .00226 9. Freight-car costs Distance-related Car-km 7,647 285,000 .0268 Time-related Car-day in use 2,030 3,563 .57 Add: Interest on capital 5,758 1.61 Total car-day costs 7,788 2.18 Total long-rum variable cost, 1974 OPERATING 38,608 INTEREST ON CAPITAL 10,505 TOTAL 49,113 119 Appendix H FORMULA FOR CALCUILATING CARLOAD SHUNTING AND MARSHALING COSTS Hypothetical figures for (XYZ Railway, 1974 projection) I Total cars loaded (a) At wayside station 36,000 (b) At depot stations (i) In block trains (No. of trains = 6,000) 120,000 (ii) In individual carloads 449,000 (c) Total 605,000 II Total shunting movements in originating depot stations (a) Block trains = 1 hr = equivalent 3.5 cars, industry to marshaling yard plus 1 movement for attachment of brake van - equivalent 4.5 movements x 6,000 trains 27,000 (b) Individual carloads = No. of cars loaded x 2 (siding to marshaling yard plus marshaling) 898,000 (c) Total 925,000 III Total shunting movements in destination depot stations (a) Block trains = 1 hr = equivalent 3.5 cars, marshaling yard to industrial siding plus 1 movement for detach- ment of brake van = equivalent 4.5 movements x 6,000 trains 27,000 (b) Individual carloads = No. of cars received x 1 (marshaling yard to siding) 449,000 (c) Total 476,000 IV Total shunting moves, origin and destination at depot stations (II(c) and III(c)) 1,401,000 V Total permanent shunting locomotive-hours 436,000 VI Average number of shunting movements per shunting locomotive-hour 3.5 120 Appendix H (continued) (The last two factors are introduced because on almost all railways in countries where the Bank operates thev afford the only means of assessing the total number of shunting movements in yards. Shunting locomotive-hours are recorded as part of the standard statistics; the average number of shunting movements per shunting locomotive- hour can be determined either by a special study over a period of normal operation or from records maintained at dead-end terminal stations, where every car must of necessity be shunted and mar- shaled. Similar figures for intermediate depots may be misleading as many cars may pass through without requiring shunting or re- marshaling. The desirability of maintaining records of total shunting and marshaling movements by yard locomotives is mentioned in Appendix B, para. 12.02) VII Estimated total shunting movements (V x VI) 1,526,000 VIII Therefore, assumed number of intermediate shunting movements (VII - IV) 125,000 IX Total freight car-km, loaded and empty (000) (a) Block trains 72,000 (b) Other freight trains 213,000 (c) Total 285,000 X Therefore, average distance between intermediate shunting movements, individual cars only. (It is assumed that block trains will not be remar- shaled en route) = Total car-km on other trains (IX(b)) Assumed no. of Total cars loaded on intermediate movements + other than block trains (VIII) (I(a) + I(b)(ii)) 213,000,000 = 350 km 125,000 + 485,000 XI Formula for calculating average number of intermediate shunting movements for any given carload journey (Average distance between turnaround, minus average distance between intermediate 'shunting movements) divided by average distance between intermediate shunting movements. (The distance between turnaround is, of course, the distance between two successive loadings of the freight car. In the case of the railway as a whole, or for individual blocks of traffic, the average distance between turnaround is determined by 121 Appendix H (continued) dividing total car-km (loaded and empty) by total car loadings. In the case shown above the average for the whole railway is 471 km; for cars moving in block trains it is 600 km and for other cars 439 km. When considering specific existing or p-;ospective traffics or consignments it will be necessary, however, to determine the amount of empty car haulage if any, that each specific movements might entail, before and/or after the loaded movement. It will obviously be less costly to consign traffic from a station where there is an adequate supply of empty cars of a type suitable for carriage of the commodity concerned, than from a station to which empties must be hauled. Similarly, where there is at the destination station sufficient traffic to load the cars out again, the cost will be less than where the cars must be back-hauled or transferred to another station empty. In certain circumstances it may be found that empty haulage is involved both before and after the loaded haul, but usually it is only in the case of specialized types of cars, such as tank, livestock, and ore cars, that the ratio of empty to loaded haulage is 100 percent. For other existing traffic the statistics of received and dispatched traffic by stations, if they are available, should help to indicate the proportion of empty haulage involved and the distance between turnaround. Where prospective new traffic is concerned the characteristics of the movement will need to be assessed by officers of the Operating and C'ommercial Departments, having regard to existing car distribution and requirements). XII Average cost per shunting movement in terminal and intermediate depot stations = total long-run variable cost of yard operations total shunting movements as in VII above. XIII Total cost of shunting in terminal and intermediate yards for one carload at any given length of haul = 2 at origin + 1 at destination + intermediate movements calculated as in XI x cost per movement as in XII. In the case of the hypothetical XYZ Railway the total yard costs in 1974 were estimated at US$7.1 million equivalent. Thus the average cost per shunting movement is forecast as US$4.64 and the yard costs per average carload at varying distances between turnaround would be as follows: 122 Appendix H (continued) Distance between Average No. Equivalent cost turnaround, of shunting Total cost per car-km km movements US$ Usc 400 3.2 14.85 3.71 500 3.4 15.78 3.16 600 3.7 17.17 2.86 700 4.0 18.56 2.65 800 4.3 19.95 2.49 900 4.6 21.34 2.37 1oon 4.9 22.73 2.27 XIV Carloads dispatched from, and/or received at, wayside stations Although it may be possible to determine the number of cars loaded at wayside stations, difficulty will on most railways be encountered in asses- sing the number of loaded cars delivered to wayside stations. Analysis of received traffic by commodity and average carload per commodity may provide a fairly reliable figure. On many railways there are few wayside stations that generate traffic in or out, and in such cases operating officers can no doubt provide an accurate picture of the flow of cars involved. Care must be taken to determine the number of train locomotive shunting movements involved. If empty haulage is involved both before and after the loaded haul, as the case may be if the consignment is from one wayside station to another, then four movements will be involved--placing an emptv for loading, withdrawing the loaded car, placing the car for unloading, and finally withdrawing the empty the empty. Having estimated the total movements involved at wayside stations the cost per movement can be calculated from the total cost of train-locomotive shunting hours. The number and cost of intermediate shunting movements should be calculated as in Section XI above. 123 * A" ao = : - n~ ~ ~~~ . e D o.,C .. 0 - v.) C CA n: CL :'Cwr W ; tZrr 1 t-0 o 2~~~~~30x rCQNgO, :neoV 0D''% .gOb )na _ I - 3 I g ' 0' w : 33o2 v : - ' J R 0u,° .oC, * ~3;- -I- f , '3~ § o 9'0 I~~I ~~~ ,.~rI 5 3r1sg~ '_ ' ;w1 s)'- _ o' _ L; ~N 0-> o 5 4 O7s _ 2 4~330 1_3 ,0 h 5 ; r > >. 2 _ xn~~~~~~ 2 .: DJ_I§4. J '0I ..=S _*8 g7. >.: c ,, -> -, c&- rO3 ,'7 _J _4 2) "''' )l C a: . _C )C' -o t t'0'C 'C -1 >'t' _ Z3~ ~ao ~~ 0E I C' 7-3' -'~ '0~~~~c . a4 3" ' 0ifpI) 'C w 4)' 4 ,s> 33~~~ ,t Table J1 EMPTY RETURN IIAULAGE COSTS AND COMMODITY COSTS FROM AVERAGE ROUND-TRIP COSTS (Example Based on an Actually Observed Case) Down Traffic Up Traffic ______- A-B B-A Average net trainload (tons) 400 100 Average gross trainload (tons) 700 400 Load including locomotive (tons) 800 500 No. of cars per train -- loaded 20 7 -- empty 2 15 -- total 22 22 Length of haul, km 700 700 Locomotive-km, shed to shed 710 710 Shunting movements per car at terminals 3 3 No. intermediate shunting Car-days per car journey -- loaded 6 6 -- empty 4 4 Net ton-km 280,000 70,000 Gross trailing ton-km 490,000 280,000 Gross ton-km, including locomotive 560,000 350,000 Long-Run Variable Costs VIUnit Cost per Cost per train-journey x$) Cost per train-journey ($) unit Loaded Empty Total Loaded Empty Total '$) Proportion Proportion Proportion ProDortion Documentat4on Car consigned 1.80 36.00 - 36.00 12.60 - 12.60 Yard costs Car handled 4.64 278.40 27.84 306.24 97.44 208.80 306.24 Track costs Gross ton-km .00058 311.80 13.00 324,80 101.50 101.50 203.00 Train costs Train-km .322 204.91 20.49 225.40 71.72 153.68 225.40 Locomotive costs: Fuel, lubricants etc. Gross trailing ton-km .000135 63.50 2.65 66.15 18.90 18.90 37.80 Other costs Loco -km .543 370.11 15.42 385.53 192.77 192.76 385.53 Car-day costs Car-day 2,18 261.60 17.44 279.04 91.56 130.80 222.36 Car-km costs Car-km .0268 375.20 37.52 412.72 131.32 281.40 412.72 TOTAL 1,901.52 134.36 2,035.88 717.81 1,092.84 1,810.65 Comments on Table Jl: (i) Down traffic in this example exceeds up traffic in ratio of 4:1. is impos- (ii) If the characteristics of the traffic flows are such that it sible to reduce this imbalance, then in accordance with conventional costing concepts the traffic moved in either direction much bear the cost of empty return movement on the respective back-hauls, as follows: Down traffic -- $ 1,901.52 + 1,092.84 = $ 2,994.36 per train = $ 7.49 per ton (average) = 1.07 c per net ton-km (average). Up traffic -- $ 717.81 + 134.36 $ 852.17 per train $ 8.52 per ton (average) = 1.22 ¢ per net ton-km (average) (Individual commodities will, of course, vary from average according to loability, type of car, and other factors (see Table I2)) attrac- (iii) If the possibility exists to increase up traffic by offering tively low rates, then it will be seen that the marginal cost of Increasing the up trainload from 100 tons to 400 tons is only $225.23 per ton-km. ($ 2,035.88 minus $ 1,810.65) = $ 0.75 per ton = 0.11 i Any rate in excess of these figures will contribute to fixed costs up and profit. The danger here is that very low rates may stimulate traffic to the extent that ultimately up traffic may exceed down traffic, in which event marginal cost pricing would no longer be be relevant. It is suggested that, if such an eventuality should considered possible, no rate should be set below the long-run cost of moving traffic in full trainloads without empty return haulage, i.e., $ 4.75 per ton in the above example ($ 1,901.52 t- 400). for (iv) Alternatively, if there should be strong evidence of the potential increasing up traffic, the cost of empty haulage in the up direction could be considered as unused Capacity Cost, and excluded from the the calculation of long-run variable costs for purposes of fixing be lower limit for rates on existing traffic. Such rates could then reduced, if necessary, by about $ 2 per ton, at which level they should to absorb presumably be sufficiently attractive to generate new traffic the excess capacity in the up direction. This concept of Capacity Costs would be particularly valuable if any threat of diversion of existing traffic to competing modes should exist. 126 Table J2 COMMODITY COSTS DERIVED FROM AVERAGE TRAIN ROUND-TRIP COSTS (As shown in Table Il) CoTmnodity 1/ Ilides Tea Cotton Coffee Groundnuts Total (dry) Lint No. of cars per train 2/ 2 2 4 6 6 20 Average carload (tons)- 8 12 15 20 30 20 Net tons per train 16 24 60 120 180 400 Cross tons per train 43 51 114 202 262 672 Net ton-km 11,200 16,800 42,000 84,000 126,000 280,000 Gross ton-km 30,100 35,700 79,800 141,400 183,400 470,400 Long-run variable cost ($) Documentation 3.60 3.60 7.20 10.80 10.80 36.00 Yard costs 27.84 27.84 55.68 83.52 83.52 278.40 Loco., train and track costs4/ 60.80 72.11 161.20 285.63 370.58 950.32 Car-day costs 5/ 26.16 26.16 52.32 78.48 78.48 261.60 Car-km costs 5/ 37.52 37.52 75.04 112.56 112.56 375.20 TOTAL, LOADED HAUL 155.92 167.23 351.44 570.99 655.94 1,901.52 Empty return haulage5/ 109.28 109.28 218.58 327.85 327.85 1,092.84 TOTAL, LONG-RUN VARIABLE COST 265.20 276.51 570.02 898.84 983.79 2,994.36 Cost per net ton ($) 16.57 11.52 9.50 7.49 5.47 7.49 Cost per net ton-km (cents) 2.37 1.65 1.36 1.07 .78 1.07 NJ Notes 1/ The number of commodities carried over any section of the line will vary widely, but all commodities having the same load- ahility and carried in cars of comparable type and capacity can be consolidated in one calculation. 2/ This is a simplified example. The average train will normally consist of cars and fractions of cars. The makeup will be derived by dividing total car-km of each commodity by total train-km. 3/ Average carload of each commodity can be assessed in a ntimber of ways, e.g.: (a) total tonnage divided by total cars loaded; (b) net ton-km divided by car-km, or, if statistics by commodity are not available; (c) examination of waybills for a representative period. 4/ Simplified calculation, in ratio of gross trailing ton-km (see paras. 2.116 and 2.117 in Chapter II). 5/ To simplify this example the commodities selected are all carried in the same type of boxcar. Cost per car and the ratio of empty return haulage are therefore the same for all commodities. In practice there will be differences between cars of varying types, and the ratio of empty haulage will vary according to the suitability or otherwise of the various cars for loading commodities for the backhaul. Appendix K FREIGHT TRAFFIC COST SHEET FOR CARLOAD TRAFFIC 1. Commodity Maize 2. From Various to Port 3. Length of haul 960 km (average) 4. Percentage of empty back-haul 40 % 5. Type of freight car - bogie/4-wheeler/tank/hopper/livestock/box/ gondola/flat 6. Average tare weight of car 15 tons 7. Average net load 35 tons 8. Average gross load 50 tons 9 Turnaround time - actual/estimated 8.5 days 10. No. of shunting movements involved: (a) Train-locomotive shunting (b) Yard-locomotive shunting (c) Total or (d) All-line average 4.8 11. Other charges - Collection - Delivery - Loading - Unloading - Transshipment- Port charges $10 per car 12. Duration of traffic Permanent 13. Can traffic be carried in cars now being back-hauled empty between stations indicated? No 14. Is there surplus capacity on existing trains to accommodate this traffic without increasing train mileage over the whole or any section of the haul? No 15. Any other relevant information. Calculation of Cost Cost per car journey Operation ($) Documentation Unit cost $ 1.80 per consignment No. of cars per consignment 3.6 (average) 0.50 Terminal and intermediate yard costs: Unit cost $ 5.10 per car movement No. of units 4.8 (as in 10 b or d) 24.48 128 Appendix K (continued) Cost per car journey Operation ($) Wayside station shunting: Unit cost $ per car movement No. of units (as in 10a) Freight-car costs: (a) Provision Unit cost $ 2.18 per car-day Turnaround time 8.5 days ( as in 9) 18.53 (b) Movement Unit cost $ 0.0268 per car-km No. of units 1,344 (as in 3 + 4) 36.02 Line-haul costs: Unit cost $ 0.00226 per gross trailing ton-km No. of units (3 x 8) + (3 x 6 x 4) (960 x 50) + (960 x 15 x .40) - 53,760 121.50 Collection $ per ton x Delivery $ per ton x Loading $ per ton x Unloading $ per ton x Transshipment $ per ton x Port charges $10 per car 10.00 Long-run variable cost per car journey $211.03 Per net ton $ 6.03 Per net ton-km 0.63q 129 Appendix L FREIGHT TRAFFIC COST SHEET FOR TRAINLOAD TRAFFIC 1. Commodity Cement clinker 2. From A to B 3. Length of haul 400 km 4. Percentage of empty back-haul 100 5. Type of wagon -- bogie/4-wheeler/tank/hopper/livestock/box/gondola/flat 6. Average no. of cars per train 14 plus brake van 15 7. Average tare weight of train 270 tons 8. Average net load 560 tons 9. Average gross load 830 tons 10. Type of locomotive Diesel 11. Weight of locomotive 80 tons 12. Locomotive-km (including shed/station and station/shed) 415 km 13. No. of shunting moves: (a) Train-locomotive shunting 2 (b) Yard-locomotive shunting 2 (c) Total 4 14. Turnaround time -- actual/estimated 4 days 15. Other relevant information Calculation of Cost Cost per train journey Operation $ Documentation $1.80 per unit 1.80 Terminal costs (a) At wayside stations Unit cost $28.62 per train movement 57.24 (b) At depot stations Unit cost $22.95 per train movement 45.90 Freight-car costs (a) Provision Unit cost $2.18 per car-day 130.80 No. of units (6 x 14)* = 60 (b) Movement Unit cost $0.0268 per car-km 321.60 No. of units (3 x 6) x 1 + (4)* 12,000 Locomotive costs Unit cost $0.653 per loco-km 541.99 No. of units 830 (as in 12 + 4)* * Line numbers above. 130 Appendix L (continued) Cost per train journey Operation $ Train costs Unit cost $0.322 per train-km No. of units 800 (as in 3 + 4)* 257.60 Track etc. costs Unit cost $0.00058 per gross ton-km (including locomotive No. of units (9 x 3)* + (11 x 12)* + (7 x 3)* + (11 x 4)* 506,400 293.71 Long-run variable cost per train-journey $1,650.64 Per net ton $ 2.95 Per net ton-km 0.74¢ * Line numbers above. 131 Appendix M FREIGHT TRAFFIC COST SHEET FOR CALCULATION OF LONG-RUN VARIABLE COST AT VARYING LENGTHS OF HAUL (XYZ Railway: Branch C to B, Mainline B to Port A) Commodity: Groundnuts Percentage of empty back-haul: 40 Average carload: Tons Terminal costs per car: Documentation 1.80 Net 35 Shunting and marshaling 15.39 Tare 16 Port charges 5.00 Gross 51 22.19 Intermediate Freight-car costs Length of Terminal marshaling Car-day Car-km Other-line Long-run variable cost haul, km Costs, $ costs, $ costs/l, $ costs, $ costs/2, $ Per car, $ Per net ton, $ Per net ton-km, c 20 22.19 - 4.33 0.70 2.34 29.56 0.84 4.20 30 22.19 - 4.53 1.05 3.51 31.28 0.89 2.97 40 22.19 - 4.63 1.40 4.68 32.90 0.94 2.35 50 22.19 - 4,74 1.75 5.85 34.53 0.99 1.98 100 22.19 - 5.56 3.50 11.71 42.96 1.23 1.23 200 22.19 - 7,00 7.00 23.42 59.61 1.70 0.85 300 22.19 - 8.45 10.50 35.13 76.27 2,18 0.73 400 22.19 5.13 9.89 14.00 46.84 98.05 2.80 0.70 500 22.19 5.13 11,33 17.50 58.55 114.70 3.28 0.63 600 22.19 5.13 12.77 21.00 70.26 131.35 3.75 0.62 700 22.19 5.13 14,21 24.50 86,10 152.13 4.35 0.62 800 22.19 10.26 15.66 28.00 101.94 178.05 5.09 0.64 900 22.19 10.26 17.10 31.50 117.79 198.84 5.68 0.63 1000 22,19 10.26 18,54 35.00 133.63 219.62 6.27 0.63 /I Car turnaround includes 1 day loading, I day unloading, plus running time at 200 kin/day, loaded and empty. /2 Unit costs as in Table 2.4. Appendix N PRO FORMA SEPARATION OF COSTS OF PASSENGER, MAIL, AND EXPRESS TRAFFIC (Hypothetical Case of XYZ Railway) I Projection of Future Costs (000 units) 1970 long- Projected Projected run long-run Interest total variable operating on long-run Kind of cost costs at Ratio of variable capital variable 1974 prices output cost, (Appendix cost, (Table 2.1) '74:'70 1974 F) 1974 Track etc. costs 2,553 1.00 2,553 1,031 3,584 Train costs 5,825 1.00 5,825 - 5,825 Locomotive costs: Diesel, mainline 3,074 1.65 5,072 910 5,982 Steam, mainline 3,355 0.00 - - - Diesel, shunting 123 2.00 246 48 294 Steam, shunting 155 0.50 78 8 86 Railcars 1,481 1.00 1,481 630 2,111 Passenger-car costs: First-class cars 940 1.00 940 564 1,504 Second-class cars 1,175 1.00 1,175 705 1,880 Third-class cars 1,81.5 1.00 1,815 1,089 2,904 Restaurant and kitchen cars 400 1.00 400 240 640 All other cars 700 1.00 700 420 1,120 Yard costs 78 1.00 78 12 90 Total 21,674 20,363 5,657 26,020 II Car and gross ton-km Car-km, Gross ton-km Kind of car (000) (million) First-class cars 15,000 600 Second-class cars 25,000 875 Third-class cars 60,000 1,800 Restaurant and kitchen cars 8,000 290 Canteen cars 2,000 60 Mail cars 6,000 180 Express cars 5,000 160 Brake and baggage-cars 13,000 325 TOTAL 134,000 4,290 133 Appendix N (continued) III Allocation of car-km to services (000 units) First Second Third Kind of car Class class class Mail Express Passenger-carrying cars 15,000 25,000 60,000 - - Restaurant & kitchen cars/l 6,000 2,000 - - - Canteen cars/2 - 500 1,500 - - Mail and express - - - 6,000 5,000 Brake & baggage cars/3 2,255 2,955 6,610 645 535 TOTAL 23,255 30,455 68,110 6,645 5,535 Percent 17.4 22.7 50.9 4.9 4.1 /1 Restaurant cars are estimated to be used 75 percent by first-class passengers, 25 percent by second-class passengers. /2 Canteen cars are estimated to be used 75 percent by third-class passengers and 25 percent by second class passengers. /3 Brake and baggage vans are pro rated to other car-km. IV Allocation of gross ton-km to seririces/4 (million) Kind of car First Second Third class class class 'Mail Express Passenger-carrying cars 600 875 1,800 - - Restaurant & kitchen cars 218 72 - - - Canteen cars 15 45 - - Mail and express - - 180 160 Brake & baggage cars 56 74 165 16 14 TOTAL 874 1,036 2,010 196 174 Percent 20.4 24.2 46.8 4.6 4.0 /4 The allocations follow the same pattern as for car-km. 134 Appendix N (continued) V. Allocation for long-run variable cost (000 units) Kind of cost Basis of First Second Third Allocation class class class Mail Express Track, etc. costs Gross ton-km 731 866 1,676 168 143 Train costs Car-km 1,014 1,322 2,965 285 239 Locomotive costs Car-km 1,041 1,358 3,046 293 244 Railcar costs Seat-km 352 704 1,055 - - Passenger-car costs Actual 1,504 1,880 2,904 - - Restaurant-car costs As in III 480 160 - - - Other car costs Car-km 97 148 350 287 238 Yard costs Car-km 80 107 240 23 20 TOTAL 5,299 6,545 12,236 1,056 884 Add: express terminal costs (Section V of Appendix A) 500 1,384 135 : ~ ~~ ~ ~~ ~ ~ ~ ~ ~_ ~ ~ ~ G~ ~ ~ ~ ~5- ~ ~ ~ 7 0IeC -4 ~o .. 0~ r . - 2 .3 4 0o _ r~~~~~0 a - r. -~~~~I S4 .4- 7 -41 o- o . _, 3 o . ~ ~~~~~-|- ~3 ~_=. - . 7 5 0 °00c..7 o 00w4 - - 0- .0S 'CG4. O7 °70. $0 .0 0> W~~~~~0 - _ 7oOC7 7_O07 4 b co o4~ , ...... W Ur q vo°o 2 o c c e X ¢, _e t ' ,-> C C °C e' $00 0' - _CO 00 4 2 G. O CC O _G c O.u.Ucu |' e C17 7.7 s eC.CC-° s o o 000c; 07000.00 0...C 77C C - 00136 o~~ ~ a 3- r e ~ ~ ~N ~~~ 0 -3 3- - ._3- 4_ r; r 3- e 0 _ 7- I'~~~~e ' *~ ~~~ 3- .0 4 4 1 Nn G c~~3 - -- S '- _ -Bv: *-1 - _. N 4 _~ ~ G :wsE~g -. u K C 2 _ c.4 -c C~~~~~~~~ c3 ._ -_- c a 33 - 3- 3- 3-~~13