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Transportation Accounting Fundamentals 21 tions such as planning, preprogram start-up activities, accounting and legal services, fringe ben- efits, and rent. Typical administrative expenses include the following: Salaries for administrative personnel. Fringe benefit costs for administrative personnel. Rent and utilities for general office and administrative space. General office supplies and materials. Casualty and liability costs not related to vehicle operations. Most miscellaneous expenses. Professional fees (e.g., legal and accounting services). Property taxes. Office insurance. Equipment rental. These expenses are generally NOT directly related to the level of service provided; they tend not to change unless the level of service changes significantly. The total cost of providing transportation service equals the sum of all capital and operating costs. Direct versus Shared Costs Direct costs are expenses that can be associated on a one-to-one basis with a given service. Examples of these costs include operator labor, fuel costs, and maintenance costs. Generally, most of the direct costs of transportation service are variable costs and are the types most people think about when they consider costs, such as driver wages and gasoline. Shared costs (sometimes called indirect costs) are those that CANNOT be associated on a one- to-one basis with a given transportation service. These costs are representative of functions that often support more than one service. The majority of shared costs are administrative and facility costs. These costs also commonly called overhead costs or indirect costs. These costs cover items such as planning, preprogram start- up activities, client screening and eligibility determinations, accounting, and legal services. These expenses may be overlooked when providers calculate the cost of a specific service. Shared costs are generally fixed costs. For agencies that operate more than one service (e.g., an Area Agency on Aging that provides home delivered meals, transportation, and other services), shared costs must be allocated on a reasonable basis to each individual service so that sufficient revenues can be collected to cover all of the shared costs. The total cost of providing transportation service equals the sum of all direct and shared costs. (OMB's cost principles state this as total cost equals direct cost plus the allocable portion of indi- rect costs, minus rebates.) Understanding How Costs Are Incurred The process of determining how much a specific transportation service costs has the following steps: 1. Assembling cost and service data. 2. Assigning the cost figures to categories that explain how these costs vary. 3. Calculating average unit costs. These unit costs then can be used to determine costs of specific routes or services to particu- lar agencies or to particular funding sources.