Sharing the Costs of Human Services Transportation (2011) / Chapter Skim
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Pages 23-28
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From page 23... ...
All Stakeholders Should Pay Their Fair Share Understanding How Costs Are Incurred Although prices for services can be based on many factors, a fundamental premise of this cost sharing report is that prices for transportation services should be based, at least to some extent, on 23 C H A P T E R 7 What's the Right Price for That Transportation Service?
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From page 24... ...
Assigning Costs to Respective Cost Categories: Variable or Fixed Costs The distinction between fixed and variable costs is extremely useful in understanding the costs of transportation services. The assumption that each line item expense can be expressed as either a variable cost or a fixed cost is a fundamental underpinning of our Cost Sharing Model.
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From page 25... ...
creates a substantially less accurate cost figure than the cost figure provided by the Cost Sharing Model. As previously noted, • The number of vehicle hours is directly related to most operator labor costs because driver expense is a function of the amount of time that vehicles are in operation.
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From page 26... ...
. Again, the outputs of the Cost Sharing Model should be calculated for each specific service and then their individual costs should be summed to express the total annual costs of all transportation services.
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From page 27... ...
The cost sharing equation can be modified to estimate the costs of service changes by omitting the fixed cost factor because the fixed costs will not change. Service changes, increases or decreases, can be estimated by the following cost change equation: COST CHANGE = CHANGED ANNUAL HOURLY COST + CHANGED ANNUAL MILEAGE COST Where CHANGED ANNUAL HOURLY COST = Cost per hour times the changed Annual Hours of Operation CHANGED ANNUAL MILEAGE COST = Cost per mile times the changed Annual Miles of Operation.
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From page 28... ...
Summary Determining the distinction between the cost of a transportation service and the price that the transportation provider charges its customers is a particularly useful task, especially when those customers are human service agencies. Prices that are determined from a detailed cost analysis benefit the transportation provider by ensuring sufficient income for operations and benefit the purchaser by ensuring an equitable price.
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