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COST ACCOUNTING STANDARD TRANSPORTATION

Operating Costing
It is a method of costing applied by undertakings which provide service rather than production of commodities. Like unit costing and process costing, operating costing is thus a form of operation costing. The emphasis under operating costing is on the ascertainment of cost of rendering services rather than on the cost of manufacturing a product. It is applied by transport companies, gas and water works, electricity supply companies, canteens, hospitals, theatres, school etc. Within an organisation itself certain departments too are known as service departments which provide ancillary services to the production departments. For example, maintenance department; power house; boiler house; canteen; hospital; internal transport.

Operation Costing
It represent a refinement of process costing. In this each operation instead of each process of stage of production is separately costed. This may offer better scope for control. At the end of each operation, the unit operation cost may be computed by dividing the total operation cost by total output. It is defined as the refinement of process costing. It is concerned with the determination of the cost of each operation rather than the process. In those industries where a process consists of distinct operations, the method of costing applied or used is called operation costing. Operation costing offers better scope for control. It facilitate the computation of unit operation cost at the end of each operation by dividing the total operation cost by total input units. It is the category of the basic costing method, applicable, where standardized goods or services result from a sequence of repetitive and more or less continuous operations, or processes to which costs are charged before being averaged over the units produced during the period. The two costing methods included under this head are process costing and service costing.

Role of Operating Cost Accounting
Balance sheets and profit and loss statements do not reveal how profitable one product is versus another, or whether one plant produces more efficiently than another. Although the stockholder or investment analyst may care little about details of efficiency and cost since to them the overall profit of the business is sufficient, management must take a different point of view. Naturally, management is interested in maintaining the overall position of the company. The overall position of a company can include such measures as how successfully it competes, how it is perceived by its customers, competitors, and investors, and its capacity for future growth. In cost accounting the total expenditures in operating a business are broken down on per item or per unit basis, as for example the cost of producing a gallon of gasoline, a ton of coal, a dozen shirts, or a refrigerator. The same idea can be extended to cost per production order, as when a special product is made for a customer, or extended to cost per activity or operation, such as the cost of drilling ½ inch holes, or plating sheet metal of a certain size and quality. Cost accounting provides information for the following purposes:

1. Cost determination
The costs and expense of a business are recorded, classified, and allocated to various jobs, departments, products, or services.

2. Costs for pricing
Once costs are determined, the information also serves as a guide regarding prices to be quoted to customers. Even though selling prices are governed only partly by the costs of production, in the long run the selling price must at least equal the costs of production, or there will be serious consequence to the profit and loss statement.

3. Cost for managerial decision
In a sense, both cost determination and cost for pricing provide bases for managerial decisions. Although managerial decision making actually becomes much more complex than the statement above implies, cost information may be helpful in making decision that have to do with (a) whether to add a new product, or to drop one that is now being produced (b) Whether to manufacture a certain unit, or buy it on the outside, and (c) whether to add certain sales terrories and drop others.

4. Cost control
One of the more essential purposes of cost accounting is control of expenditures. Such control leads to efficiency in the use of labor, materials machines and plants. Although to a large extent selling prices are determined by competition, the profit-making capacity of a business is guided by the efficiency with which costs are controlled.

crash costs and environmental costs. including vehicle expenses. focusing on costs does not ignore transportation benefits. It is not uncommon for transport costs to account for 10% of the total cost of a product. This chapter summarizes these cost estimates and describes how to obtain additional information on individual costs. There are also costs involved in gathering information. and less bulky production techniques. Transportation cost is an important element of cost for procurement of materials for production and for distribution of product for sale. and environmental protection (Evaluating TDM). people. Therefore. cost accounting records should present transportation cost separately from the other cost of inward materials or cost of sales of finished goods. enterprises and individuals must take decisions about how to route passengers or freight through the transport system. congestion reduction benefits consist of reductions in travel time and vehicle operating costs. road and parking facility savings. institutions.. Costs and benefits have a mirror image relationship: a cost can be defined as a reduction in benefits and a benefit can be defined as a reduction in costs. These benefits are usually measured in terms of cost reductions. or any other item of value. For example. travel time costs.g. marketing techniques as well as fuel costs are changing constantly. Economists have developed estimates of many transportation costs for use in economic analysis. benefits). so this chapter primarily describes transportation costs. its allocation /apportionment to a product or service are well established. time. This Encyclopedia evaluates TDM strategies based on effectiveness in achieving various transportation improvement objectives (i. such as electronics. locations. etc. Costs (benefits) reduce (increase) scarce resources such as money. However. Trade involves transactions costs that all agents attempt to reduce since transaction costs account for a growing share of the resources consumed by the economy.) have tonegotiate or bid for the transfer of goods. and enforcing contracts and transactions. All users (e. Transportation benefits are often measured in terms reduced transportation costs. governments. Calculating costs is therefore the basis for calculating benefits. the choice of a transportation mode to route people and freight within origins and destinations becomes important and depends on a number of factors such as the nature of the goods. negotiating. health. This share also roughly applies to personal mobility where households spend about 10% of their income for transportation. individuals. which are often referred as the cost of doing business. The Finance Act 2003 also specifies the certification requirement of transportation cost for claiming deduction while arriving at the assessable value for excisable goods cleared for home consumption / export.e. environmental quality. There is a need to standardize the record keeping of expenses relating to transportation and computation of transportation cost. Transport systems face requirements to increase their capacity and to reduce the costs of movements. road and parking facility costs.Frequently. land. information and capital because supplies. distribution systems. including congestion reduction. Economic Impacts refer to costs and benefits. the available . salaries. consumer savings. including the automobile which has a complex cost structure. tariffs. road safety. enterprises.Introduction of Transportation cost The cost accounting principles for tracing/ identifying an element of cost. Thus. This choice has been considerably expanded in the context of the production of lighter and high value consuming goods.

technology. Empirical evidence underlines that raising transport costs by 10% reduces trade volumes by more than 20%. and particularly their respective distances.g. The difference between costs and rates either results in a loss or a profit from the service provider. They come as fixed (infrastructure) and variable (operating) costs. and on how passengers and freight are carried. They either reflect costs directly involved with shipping (cost-of-service) or are determined by the value of the commodity (value-of-service). impact on transport costs. Rates are the price of transportation services paid by their users. related to transactions. but profitability is paramount. energy. Transport costs have significant impacts on the structure of economic activities as well as on international trade. Jointly. Rates are often visible to the consumers since transport providers must provide this information to secure transactions. they define transportation costs. infrastructure. This means that the rate will be adjusted according to the demand and the supply. shipments and the friction of distance. For public transit. rates are often fixed and the result of a political decision where a share of the total costs is subsidized by the society. In a competitive environment where transportation is a service that can be bided on. depending on a variety of conditions related to geography. Considering the components of transport costs previously discussed. transport costs are influenced by the respective rates of transport companies. air transportation) rates are subject to a competitive pressure. Three major components. They may not necessarily express the real transport costs. administrative barriers. origins and destinations.infrastructures. Since many actors involved in freight transportation are private rates tend to vary. the portion of the transport costs charged to users. rate setting is a complex undertaking subject to constant change. For freight transportation and many forms of passenger transportation (e. . often significantly. The goal is to provide an affordable mobility to the largest possible segment of the population even if this implies a recurring deficit (public transit systems rarely make any profit). It is thus common for public transit systems to have rates that are lower than costs. Transport costs are a monetary measure of what the transport provider must pay to produce transportation services. They are the negotiated monetary cost of moving a passenger or a unit of freight between a specific origin and destination.

However. Bulk commodities such as energy (coal. Insurance costs are also to be considered and are commonly a function of the value to weight ratio and the risk associated with the movement. Many shippers or freight forwarders are primarily guided by direct money costs when considering the price factor in modal choice. Many products require packaging. another for the nation and another for exports. economic actors often base their choice of a transport mode or route on only part of the total transport price. Landlocked countries tend to have higher transport costs. Among the most significant conditions affecting transport costs and thus transport rates are: Geography.2. Costs and Time Components Transportation offers a spectrum of costs and level of services. Economies of scale. insurance and vehicle tax. Distance is commonly the most basic condition affecting transport costs. special handling.000 deadweight tons tanker ship. Transport activities are large consumers of energy. are bulky or perishable. different economic sectors incur different transport costs as they each have their own transport intensity. As such. economic costs or the amount of energy used. Type of product. discomfort and risk (e. minerals and grains are highly suitable to obtain lower unit transport costs if they are transported in large quantities. Its impacts mainly involve distance and accessibility.000 km would cost $1 on a 150. Transport typically account for about 25% of all the energy consumption of an economy. The narrow focus on direct money costs is to some extent attributable to the fact that time costs and costs related to possible inefficiencies are harder to calculate and often can only be fully assessed after the cargo has arrived. It can be expressed in terms of length. The price of a transport service does not only include the direct out-of-the-pocket money costs to the user but also includes time costs and costs related to possible inefficiencies. The impact of geography on the cost structure can be expanded to include several rate zones. oil). especially oil. About 60% of all the global oil consumption is attributed to transport activities. often twice as much. motorists are biased by short run marginal costs. The costs of several energy . For passengers. thereby excluding fixed costs such as depreciation. especially if long distance travel is involved. time. They might narrow down the price of a specific trip by car to fuel costs only. Energy. Coal is obviously a commodity that is easier to transport than fruits or fresh flowers as it requires rudimentary storage facilities and can be transshipped using rudimentary equipment. It varies greatly according to the type of transportation mode involved and the efficiency of specific transport routes. A similar trend also applies to container shipping with larger containerships involving lower unit costs. the lower the unit cost. the more the friction of distance is important. comfort and amenities must be provided. such as one for local. For example. The more it is difficult to trade space for a cost. as they do not have direct access to maritime transportation. Another condition affecting transport costs is related to economies of scale or the possibilities to apply them as the larger the quantities transported. unexpected delays).000 deadweight tons tanker ship and $3 on a 50. but products still need to be loaded or unloaded from the container. With containerization the type of product plays little in the transport cost since rates are set per container. For instance.g. moving a barrel of oil over 4.

. They include the transport time. security fees. Trade imbalances.intensive transport modes. Significant transport rate imbalances have emerged along major trade routes. International competition has favored concentration in many segments of the transport industry. Concerns the complex competitive and regulatory environment in which transportation takes place. transport costs for imports tend to be higher than for exports. For a specific port terminal. the timing. The same condition applies at the national and local levels where freight flows are often unidirectional. implying empty movements. delays and negative economic consequences. Infrastructures. The transport time component is also an important consideration as it is associated with the service factor of transportation. Transport services taking place over highly competitive segments tend to be of lower cost than on segments with limited competition (oligopoly or monopoly). a ship arrives at 8AM and leaves at 5PM (timing) with the average delay being two hours (punctuality). if a trade balance is strongly negative (more imports than exports). When two or more modes are directly competing for the same market. geopolitical risk premiums and additional baggage fees. More developed transport systems tend to have lower transport costs since they are more reliable and can handle more movements. has become dependent on a wide array of surcharges as a source of revenue. Imbalances between imports and exports have impacts on transport costs. Surcharges. The passenger transport industry. particularly airlines. particularly in developing countries. Consequently. The efficiency and capacity of transport modes and terminals has a direct impact on transport costs. a freight forwarder must call at least five days in advance (order time). to reflect temporary conditions that may impact on costs assumed by the transporter. such as air transport. namely maritime and air modes. a maritime shipper may offer a container transport service between a number of North American and Pacific Asian ports. This is especially the case for container transportation since trade imbalances imply the repositioning of empty containers that have to be taken into account in the total transport costs. Different modes are characterized by different transport costs. labor. Regulations. It may take 12 days to service two ports across the Pacific (transport time) and a port call is done every two days (frequency).Containerized transportation permitted a significant reduction in freight transport rates around the world. Refer to an array of fees. security and safety impose additional transport costs. the order time. Poor infrastructures imply higher transport costs. are particularly susceptible to fluctuations in energy prices. often set in an arbitrary fashion. In order to secure a slot on a ship. The most common are fuel surcharges. Competition and regulation. For instance. cabotage laws. the outcome often results in lower transport costs. the punctuality and the frequency. Mode. since each has its own capacity limitations and operational conditions. such as tariffs.

and intermediate (transshipment) costs that can be avoided. Relations between terminal operators and carriers have thus become crucial notably in containerized traffic. Indeed. Empirical evidence for passenger vehicle use underlines the relationship between annual vehicle mileage and fuel costs.3. loading and unloading at the origin and destination. However. transshipment and unloading. The role of transport companies has sensibly increased in the general context of the global commercial geography. Two major terminal costs can be considered. To simplify transactions and clearly identify the respective responsibilities specific commercial transportation terms have been set. They include the purchase or major enhancement of fixed assets. Since physical assets tend to depreciate over time. firms using freight transport services are not always motivated by notions of cost minimization. capital investments are required on a regular basis for maintenance. the more frequent the movements and the more likely they will take place over longer distances. doubling of transport costs can reduce trade flows by more than 80%. terminals and vehicles. Terminal costs. Transport providers make a variety of decisions based on their cost structure. warehousing and distribution). While operating costs are high for air transport. notably at ports.Technological changes and their associated decline in transport costs have weakened the links transport modes and their terminals. which can often be a one-time event. frequency and other service attributes. Each transport sector must consider variations in the importance of different transport costs. Such complexities make it more difficult to clearly assess the role of transport price in the behavior of transport users. have been developed to convey a pricing mechanism useful for planning and decision making. implying the higher fuel costs are. the nature of this role is changing as a result of a general reduction of transport costs but growing infrastructure costs. Costs that are related to the loading. Linehaul costs. There is less emphasis on heavy industries and more importance given to manufacturing and transport services (e. Costs that are a function of the distance over which a unit of freight or passenger is carried. a function of all the above types of transport costs.g. the lower the mileage. While the transport price plays an important role in modal choice. These are . A wide variety of transport costs can be considered. Several indexes. new functions are being grafted to transport activities that are henceforward facilitatinglogistics and manufacturing processes. Capital costs.The requirements of international trade gave rise to the development of specialized and intermediary firms providing transport services. Costs applying to the physical assets of transportation mainly infrastructures. mainly due to greater flows and competition for land. such as the Baltic Dry Index. Types of Transport CostsMobility tends to be influenced by transport costs. The more affordable mobility is. At the international level. They are needed to overcome the physical and time constraints of transshipment. They include labor and fuel and commonly exclude transshipment costs. Weight is also a cost function when freight is involved. terminal costs are significant for maritime transport. They often show "satisficing behavior" whereby the transport costs need to be below a certain threshold combined with specific requirements regarding reliability. which are unavoidable.

storage and handling of freight as well as the complex paperwork and financial and legal transactions involved in international trade. there has been a trend to consolidate these different intermediate functions. etc. customs brokers. but are required to facilitate the grouping. warehousing.firms that do not physically transport the goods. Examples included freight forwarders. and a growing proportion of global trade is now being organized by multi-national corporations that are offering door to door logistics services. . Recently. insurance agents and banking.

Definitions of Transportation cost The following terms are used in this standard with the meaning specified: Cost of transportation comprises of the cost of freight. transit insurance and cost of operating fleet and other incidental charges whether incurred internally or paid to an outside agency for transportation of goods but does not include detention and demurrage charges. stock yards etc.  Equalized transportation cost means average transportation cost incurred during a specified period.  Equalized freight means average freight. including consignment agent and C & F agent. franchisee for storing of materials /goods for further dispatch including the premises of consignment Agent and C & F Agent for the purpose.  Outward Transportation cost is the Transportation expenses incurred in connection with the sale or delivery of materials or goods from factory or depot or any other place from where goods are sold /re .  Transit insurance cost is the amount of premium to be paid to cover the risk of loss/damage to the goods in transit. .  Depot is the bounded premises /Place managed internally or by an agent. cartage.  Inward Transportation cost is the transportation expenses incurred in connection with materials /goods received at factory or place of use or sale /removal.  Cartage is the expenses incurred for movement of goods covering short distance for further transportation for delivery to customer of storage.  Depot includes warehouses.  Freight is the charges paid or payable to an outside agency for transporting materials /goods from one place to another place. Explanation:  Cost of transportation is classified as inward transportation cost and outward transportation cost. godowns.moved. storage yards.

2. transportation cost needs to be apportioned among excisable. b) Insurance claim valuation c) Working out claim for freight subsidy under Fertilizer industry coordination committee d) Administered price mechanism of freight cost element. For example.  To provide transparency in the determination of cost of transportation. its allocation /apportionment to cost centres.  To prescribe the system to be followed for maintenance of records for collection of cost of transportation. e) Determination of inward freight costs included or to be included in the cost of purchases attributable to the acquisition. 3. Objective Transportation cost  To bring uniformity in the application of principles and methods used in the determination of averaged/ equalized transportation cost. etc. f) Computation of freight included in the value of inventory for accounting on inventory or valuation of stock hypothecated with Banks /Financial institution. exempted.  For example. Scope of Transportation cost This standard should be applied for calculation of cost of transportation required under any statute or regulations or for any other purpose. . non – excisable and other goods for arriving at the average of transportation cost of each class of goods. this standard can be used for: a) Determination of average transportation cost for claiming the deduction for arriving at the assessable value of excisable goods. locations or products.

For example. 4. Social costs are the total of both internal and external impacts. External costs and benefits are borne or accrue by others. . while depreciation. maintenance. 3. such as vehicles. 2. because vehicle owners pay the same. or perceivedinternal-variable cost. a market is most efficient if prices reflect marginal costs (Market Principles). Distribution (Internal and External Impacts) Internal (also called user) costs and benefits are borne or accrue directly by a good’s consumer. and residential parking are considered fixed. Price Price refers to what a consumer pays in exchange for a particular good. depreciation is often considered a fixed cost because car owners make the same payments no matter how many miles a year they drive. 5. but a car’s operating life and resale value are affected by how much it is driven. and quiet.Transportation costs can be categorized by the following attributes: 1. For example. such as insurance. fuel. Motorists tend to perceive immediate costs such as travel time. stress. depreciation. regardless of how much a vehicle is used. while costs that are paid infrequently. Fixed costs do not. External impacts do not directly affect consumers’ decisions. Variable and Fixed Variable (also called marginal) costs increase with consumption. A number of techniques can be used to determine the value that consumers place on non-market goods. and transit fares. insurance. travel time and crash risk are variable vehicle costs because they increase directly with vehicle mileage. and so are a form of market failure (Market Principles). The distinction between fixed and variable often depends on perspective. are often underestimated. In general. land and fuel. fuel. Non-market costs involve goods that are not regularly traded in markets such as clean air. repairs and residential parking. so depreciation is partly variable over the long term. Perceived or Actual There is often a difference between perceived and actual automobile costs. Market or Non-Market Market costs involve goods that are traded in a competitive market. crash injuries. parking fees.

Efficiency Benefits Efficiency benefits result from more efficient travel. and may result in solutions to one problem that exacerbates others. These different types of benefits require different approaches to evaluate. such as when travelers shift from driving to transit or ridesharing under urban-peak travel conditions. or when a consumer avoids a trip by telecommuting or teleshopping. The benefits of a TDM program intended to reduce congestion and pollution are measured in terms of efficiency benefits. 2. while a planning process that is only concerned with increasing mobility benefits could reduce environmental quality. increased walking and cycling. and increased freight transport. Mobility benefits are usually measured in terms off increased travel (Evaluating Transportation Choice). but also include the benefits from access improvements that reduce the need for physical travel. For example. Efficiency benefits are often measured in terms of reduced vehicle travel. such as increased automobile mileage. These are so large that it is difficult to calculate the total benefits of all transportation activities. These reflect the cost savings to individuals and society when transportation becomes more efficient (fewer total resources are consumed to provide a given benefit). These reflect the incremental benefits compared with a reduced level of mobility or access. shopping. such as the benefits individuals and society gains from access to school. employment. A planning process that is only concerned with environmental protection could reduce mobility benefits. . A transportation evaluation process that only considers one category of benefits may overlook significant benefits or costs. The analysis assumes that more vehicle traffic speed and volume is necessarily better. delivery services and telework. However. such as more efficient land use. Marginal transportation benefits can be divided into these two major categories: 1. and various techniques can be used to measure these benefits (Goodwin and Persson. increased transit or aviation trips. even if such a number could be calculated it would have little practical use. Comprehensive Evaluation considers both types of benefits. 1999). Mobility and Access Benefits Mobility benefits result from increased travel. Access benefits are similar to mobility benefits. In most planning situations the important factor is the marginal (incremental) benefits provided by a particular policy or project compared with a Base Case (TDM Evaluation). friends and recreation activities.Evaluating Transportation Benefits Transportation provides tremendous benefits. The analysis assumes that less vehicle traffic volume is better. the benefits of a road capacity expansion program are measured in terms of mobility benefits.

Maintenance of records for ascertaining Transportation cost  Proper records shall be maintained for recording the actual cost of transportation showing each element of cost such as freight. such as salaries and wages of driver. repairs and maintenance.  Separate records shall be maintained for identification of transportation cost towards inward movement of material (Procurement) and transportation cost of outward movement of goods removed /sold for both home consumption and export. distance involved. lubricant grease.  Records shall be maintained separately for inward and outward transportation cost specifying the details particulars of goods dispatched. Abnormal costs relating to transportation. are to be identified and recorded for exclusion of computation of average transportation cost.  Records for transportation cost for carrying any material /product to job –workers place and back should be maintained separately so as include the same in the transaction value of the product. quantity of goods in terms of weight or volume. proper records for basis of apportionment should be maintained. proper records shall be maintained to determine the actual operating cost of vehicles showing details of various elements of cost.  In case of a manufacturer having his own transport fleet. cartage. destination of buyer. excisable goods cleared for export shall be maintained separately. complete details shall be recorded as to date of dispatch. amount paid. depreciation of the vehicles. distance covered and trips made.  Records for transportation cost from factory to depot and thereafter shall be maintained separately. etc. amount of freight etc. transit insurance and others after adjustment for recovery of transportation cost. type of transport used.  In case of hired transport charges incurred for dispatch of goods.  Records for transportation cost for exempted goods. goods hauled and transported to the depot. name of supplier /recipient. cost of fuel. . if any. cleaners and others.  Records of transportation cost directly allocable to a particular category of products should be maintained separately so that allocation in appendix – 3 can be made. amortized cost of Tyres and battery. name of consignee. both for own fleet or hired ones.  Records for transportation cost for goods involved exclusively for trading activities shall be maintained separately and the same will not be included for claiming any deduction for calculating assessable value excisable goods cleared for home consumption. description of the goods.  For common transportation cost. challan number.

air etc. Separate records of cost for mode of transportation other than road like ship. . are to be maintained in appendix – 2 which will be included in total cost of transportation.

the same should be followed consistently. distance shall be factored in to arrive at weighted average cost. Abnormal and non recurring cost shall not be a part of transportation cost. for apportionment cost depending upon the nature of products. Explanation Penalty. Explanation: Outward transportation cost of a product from factory to depot or any location of sale shall be included in the cost of sale of the goods available for sale. demurrage and cost related to abnormal break down will not be included in transportations cost. Outward transportation cost shall form the part of the cost of sale and shall be allocated /apportioned to the materials and goods on a suitable basis. . For determining the transportation cost per unit. unit of measurement followed and type of transport used: (i) (ii) (iii) (iv) (v) (vi) Weight Volume of goods Tonne-Km Unit /Equivalent unit Value of goods Percentage of usage of space Once a basis of apportionment is adopted. Treatment of cost: Inward transportation costs shall form the part of the cost of procurement of materials which are to be identified for proper allocation /apportionment to the materials /products. in order of priority.6. The following basis may be used. detention charges.

MT. For example: Sale on specific rate basis. Appendix 1 is applicable where the organisation is having its own fleet. Litre etc. For example. Finalized by CASB – WTO committee on 20 July 2005 and circulated to the Council at its meeting on 21 July 2005 (1st draft was published in June 2002 journal) . goods received after job work etc. More columns may be required to be shown in Appendix 3 specifying different types of transactions. return from customer. scrap. An enterprises shall be required to maintain cost records and other books of account in a manner which would facilitate preparation and verification of cost of transportation and other related charges and its apportioning to various products. Meter. Similar approach shall also be applied for hired outward transport charges. goods sent for job work. 1944 or section 14 of the customs Act.Cost sheet The cost sheets shall be prepared and presented in a form as per Appendices 1. 1962 or as defined in any other Act or Regulations as the case may be. Proper records shall be maintained to show separately the transportation cost relating to sending of jobs to job contractors /convertors and receipts back of processed jobs/ converted materials. Transaction value: Transaction value’ shall have the meaning assigned to it in Section 4 of the Central Excise Act.3. Unit of measurement (UM) may vary depending upon the nature of the product. 2 and 3 or as near thereto. The Standard will be operative from the date of issue. sale of waste. Number. The basis of apportionment may be adopted depending on the nature of product as indicated in Para 6. The directly allocable cost of own fleet (outward) shall be identified against different categories of products as shown in Appendix 3 and same shall be apportioned to different categories of products as shown in Appendix 3 on a basis which should be specified. Appendix 1 and Appendix 2 show the details of information to be maintained for compilation of transport cost for own fleet and hired transportation charges respectively.

cycling and waiting for transit has costs two or three times higher than time spent traveling. and place a low value on time spent as a transit passenger. Many specific attributes of travel. Various studies have calculated travel time values relative to wage rates based on traveler behavior. while others have the opposite preferences.  The cost of personal travel is usually estimated at one-quarter to one-half of prevailing wage rates.  Travel time costs tend to be particularly high for unexpected delays. such as comfort. and travel time savings are often the greatest potential benefit of transport improvements. to put it differently. Some people place a relatively high cost on time spent driving in congestion.)  Personal needs and preferences vary. Under certain conditions.  Travel time costs tend to increase with income. walking. and so tend to be willing to pay more for travel time savings.Travel Time Costs Travel time is one of the largest transport costs. (Or. walking along a busy highway or waiting for a bus in an area that seems dirty and unsafe). and lower for a comfortable passenger. vehicle costs. and tend to be lower for children and people who are retired or unemployed. driving. can be reflected in travel time costs. although under other conditions the same type of travel is considered undesirable and costly. Small.  Travel time costs tend to be higher for driving under congested conditions or passengers on crowded transit vehicles.  Travel time costs per minute tend to increase for longer commutes (more than about 20 minutes). and several time value schedules have been developed based on such studies (Wardman 1998.  A certain amount of travel time has a low cost or positive value because consumers enjoy the experience.  Under pleasant conditions. Below are some of the main factors affecting travel costs:  Commercial vehicle costs include drivers’ wages and overhead costs. . 1999). train travel and air travel are considered enjoyable and desirable. people with full-time jobs tend to have more demands on their time. walking and cycling can have positive value. safety and prestige. costs for the value of freight (particularly perishables). et al. cycling. and sometimes costs for delays beyond a critical delivery time. but under unpleasant or unsafe conditions (for example. time spent walking.

both of which recent research indicate cause significant medical problems. but a significant portion of driving occurs under non-design conditions and non-tailpipe emissions are not controlled by these technologies. Their middle estimate for gasoline cars is 3.3¢ per mile for automobiles and 53¢ per mile for heavy diesel trucks. 2.3¢ per VMT. It also omits ecological and aesthetic impacts.S. Small and Kazimi (1995) estimated Southern California motor vehicle air pollution costs of human morbidity and mortality from tailpipe particulate and ozone emissions. Engine and fuel improvements have significantly reduced tailpipe emission rates under design conditions.Environmental Costs Several studies provide monetized estimates of the environmental costs of transportation (Bein. Water Pollution and Hydrologic Impacts Roads and motor vehicles use also contribute to water pollution. and reduced visibility. Litman. Per mile emissions for many pollutants have declined over time due to emission control strategies. They state that road dust may add 4. These include air. Bein. 1999. Traffic noise tends to increase with traffic speed. such as loss of wildlife habitat. Information on hydrologic impacts is available at the NEMO Foundation . 3. but this is an exaggeration. 1. hydrologic impacts and waste disposal (such as used tires) which impose a variety of costs on society (USEPA. ozone depletion. and development density. These costs are expected to decline 50% by the year 2000 due to improved emission controls. 1999. 1997. Air Pollution Air pollution is one of the most obvious environmental costs of motor vehicle use. It omits impacts on people without acute medical symptoms although residents of polluted cities suffer reduced lung capacity and are regularly instructed to limit their physical activities. waste disposal and the environmental impacts associated with transportation facilities. noise and water pollution. Total automobile air pollution costs are therefore likely to be much higher than this study’s estimates. Information on noise costs is available from FHWA (1997b) and the Noise Pollution Clearinghouse. USEPA. and global warming costs may be significant. Their study does not account for CO and non-tailpipe particulate emissions. where traffic tends to be closer to residences. crops and wildlife damages. 1997). The authors emphasize that this is only a partial analysis. Delucchi (2000) estimates that U. Delucchi. Noise Pollution Motor vehicle traffic imposes noise pollution. 2001). Noise costs tend to be much higher on local urban roads. The TRL Strategic Environmental Assessment Newsletter provides information on efforts to monetize environmental costs for application in transportation planning. accelerations. including global warming. They estimate that emission costs are about 1/3 this value in regions with less serious air pollution problems. motor vehicle environmental costs total approximately $100 billion annually. It is common to hear claims that automobile emissions have declined by 90% or more over the last few decades. the portion of heavy vehicles and motorcycles. 2000.

through improper disposal. vendors are required to recycle used car batteries. residual impact even when proper disposal is observed. These wastes impose a variety of environmental. Some new laws and policies are intended to internalize these costs. including used tires. human health.4. and in some states a tire tax is dedicated to tire disposal. batteries. junked cars. . and because some disposal efforts are subsidized by general taxes. Crankcase oil recycling is encouraged. Waste Disposal Motor vehicles produce a number of harmful waste products that can impose externalities. and financial costs. oil and other semi-hazardous materials resulting from motor vehicle production and maintenance. aesthetic.

economy $7 trillion (net present value) in reduced output.5 to $14. They point out that each of the major price shocks during this time period has preceded a major economic recession.S. These costs vary significantly depending on conditions. often leading to increased driving. These estimates do not include military. 1. In urban areas. and construction costs. and construction expenses may dominate project costs. Traffic Calming. strategic or political costs associated with U. depletion of nonrenewable resources. the Canadian Petroleum Communication Foundation and the Canadian Petroleum Products Institute provide fuel price and consumption data. the American Petroleum Institute. 1996). including national security risks and macroeconomic impacts on individual economies that import fuel. motor vehicles did not use petroleum.6 trillion. Impacts on Non-motorized Travel Changes in the design of roads and parking facilities. 2001) estimates that these externalities average about 30¢ per gallon of gasoline. It represents a degradation of the pedestrian and bicyclist environment that reduces the viability of these modes.” (Delucchi and Murphy. planning and land costs may be modest. Put another way. Below are typical cost data. An extensive review of economic and political issues concludes that. available also provides useful information on transportation energy costs and consumption by transportation activities. and world dependence on oil imports. Greene and Tishchishyna (2000) estimate that oil market upheavals of the last 30 years have cost the U. planning and land costs tend to be much higher.S. the U. 2. including planning and design.S. 2000. The Barrier Effect (also called Severance) refers to the tendency of roads and traffic to create a barrier to nonmotorized travel. “if U. and environmental damages (including greenhouse gas emissions). Highway development involves various costs. land acquisition. Road and Parking Facility Costs Roads and parking are usually provided free or bundled with facility costs (for example. Adding capacity to existing roads . parking is usually included with housing purchases or rents) so most consumers have little idea of what a road or parking space costs to produce. would reduce its defense expenditures in the long run by roughly $1 to 10 billion per year. with a range of $3. The International Energy Agency. In rural areas. Pedestrian and Cycling Improvements and various Land Use Factors can all have significant impacts on nonmotorized transportation. vehicle traffic volumes and speeds. and that higher petroleum import prices reduce national GDP.Fuel Externalities Fuel production and consumption can impose various external costs.S. Vehicle Restrictions. safety and comfort of walking and cycling (Evaluating Nonmotorized Transport). The Transportation Energy Data Book (ORNL. there may be benefits to society from increased energy efficiency and conservation. A major study by the National Research Council (NRC. various financial subsidies. and the quality of the pedestrian environment can affect the convenience.

plus planning and land costs. BTS.000 per lane-mile in “easy” conditions up to $2. Rural intersections typically cost $2. Roadway Construction and Maintenance Costs Roadway expenditure data can be obtained from government accounts (Highway Statistics. Also see Highway Taxes and Fees. 1998). Canadian roadway expenditure data is available from Transport Canada’s Transportation In Canada Annual Report and Blanchard (1996).000 for construction. i.000. Intersections also add significant costs. These costs vary significantly depending on conditions. How They Are Collected and Distributed . government totaled $117 billion in 1999. Highway development involves various costs.000 per lane-mile in “difficult” conditions (Construction and Maintenance Branch. while a standard urban interchange typically costs $10.000 to $15.500. . and construction costs. planning and land costs may be modest. FHWA and Transportation Statistics.000.000. Road construction costs (grading and paving. In urban areas.000 to $4. Table 4 summarizes typical costs for roadway projects under various conditions. and construction expenses may dominate project costs. or very expensive if it requires land acquisition or rebuilding intersections.000. .S.can be relatively inexpensive if there is adequate right-of-way and few intersections. not including planning and land costs) typically range from $250. In rural areas. planning and land costs tend to be much higher. land acquisition. Adding capacity to existing roads can be relatively inexpensive if there is adequate right-of-way and few intersections. including planning and design.000. Cambridge Systematics (1992) and Price Trends in Federal-Aid Highway Construction (a quarterly report published by the FHWA) provide information on highway construction costs. Roadway expenditures by all levels of U. or very expensive if it requires land acquisition or rebuilding intersections.

Ridesharing (using a motor vehicle seat that would otherwise travel empty) imposes minimal incremental costs.  Strategies that shift travel from peak to off-peak reduce congestion. . roadway costs.  Strategies that reduce per capita vehicle trips provide greater benefits. so crash costs do not necessarily decline. Shifting to less congested travel conditions tends to reduce the number of crashes. location. while shifting to public transit may impose significant incremental costs if doing so requires additional transit service. and other factors. For example. and reductions in the amount of land paved for roads and parking. How Travel Changes Affect Costs  The magnitude of benefits provided by TDM varies depending on the type of travel changes they produce. including reductions in vehicle ownership and use. including reductions in vehicle ownership and residential parking costs. and therefore permile vehicle cost and emission rates. crashes.  TDM strategies that reduce average vehicle trip distances provide modest benefits. but the crashes that do occur tend to cause more damage. including reductions in parking costs.  Strategies that result in more efficient land use patterns can provide a wide range of benefits.2. including reductions in vehicle operating costs. but pollution emission benefits are small due to cold starts. although these benefits may be partly offset by Rebound Effects. traffic congestion. have mixed impacts based on the difference in costs between the modes. Strategies that shift travel to alternative modes.  Strategies that reduce per capita vehicle ownership provide additional benefits. and energy consumption. such as public transit.

tend to have an elasticity of greater than 1.0 in urban areas.0.0. Traffic Services All else being equal. Residential Parking Changes in per-vehicle mileage do not affect residential parking costs. including Smart Growth. Some TDM strategies directly reduce roadway land requirements. carsharing. an elasticity of 1. This suggests that the elasticity of congestion costs to vehicle travel is about 2. Location Efficient Development. For example. so under some circumstances even a small increase in traffic volumes can cause a large reduction in congestion delay. the elasticity of residential parking costs with respect to TDM mileage reductions is estimated to average 0. and management strategies that result in more efficient use of existing parking facilities can reduce this cost.0% reduction in mileage reduces a particular cost by 1.5%. An elasticity of 1. Traffic Congestion Traffic congestion is a non-linear function. a percentage change in vehicle mileage can be expected to cause a proportional change in environmental damages.5%. A change in congested mileage may cause a greater change in fuel consumption and externalities. such as Commute Trip Reduction programs and congestion pricing. As a result. The elasticities of various costs with respect to mileage are discussed briefly below.0.1 (A 10% change in mileage changes roadway land costs by 1%). Environmental Damages In general.0 is used for this analysis. and so have an elasticity of 0. The elasticity is estimated to be about 0.3. Fuel Externalities All else being equal. so the elasticity is 1. Some TDM strategies are particularly effective at reducing congestion. so the elasticity is 1. Reductions in vehicle ownership. transit improvements and parking management can reduce residential parking costs. which indicate the percentage change in a cost that results from a percentage change in vehicle mileage.5.0. New Urbanism and parking management. a change in vehicle mileage causes a proportional change in fuel consumption and related externalities. Such impacts tend to occur in urban areas where land values are high. including Commute Trip Reduction programs. Modeling Benefits of Travel Changes In order to evaluate these impacts it is necessary to model the relationships between mileage and various costs. This is measured using elasticity values.5-10. road pricing and parking management. For example. so TDM strategies that target congestion. Modeling reported in USEPA (1998) found that 4% change in total vehicle mileage in California urban areas would reduce traffic congestion by 7. so the elasticity of environmental costs to mileage is assumed to be 1. Roadway Land Value Changes in per-vehicle annual mileage may cause a small change in the amount of land that is devoted to roads.0. a change in vehicle mileage probably causes a proportional change in traffic services.5 means that each 1. .

8.4 and 1. Assuming that half of the additional per-vehicle annual mileage resulting from increased fuel efficiency consists of longer trips and half consists of increased trip making. The elasticity of roadway costs to mileage is assumed to be 1.0. the elasticity of parking costs with respect to mileage is 0. Vehicle Ownership Most vehicle ownership expenses are considered fixed and not affected by a change in annual per-vehicle.0. Land Use Impacts Reductions in average vehicle trip length help reduce urban sprawl. A value of 1. TDM strategies that target congestion reductions may provide a somewhat greater reductions in fuel costs for a given reduction in mileage. and increase the chances of an insurance claim. because most serious crashes involve multiple vehicles. and Distance-based Vehicle Insurance. including those that reduce per capita vehicle ownership. reduce resale value. many of these costs are actually partly variable. encourage use of alternative transportation modes.5. However. Non-residential Off-street Parking Changes in average trip distance have no affect on parking costs. Some TDM strategies provide extra traffic safety impacts. which gives the higher risk drivers an extra incentive to reduce their mileage. Vehicle Fuel A change in mileage provides a proportional change in fuel consumption. but may be larger in growing urban areas. One study found the elasticity of vehicle crash costs with respect to vehicle mileage is between 1. increased vehicle mileage tends to increase vehicle maintenance and repair costs. Reductions in vehicle trips. the elasticity of vehicle ownership costs with respect to mileage is estimated to be 0. and therefore crash risk. or about 40% of total vehicle ownership costs. a percentage change in vehicle mileage can be expected to cause a proportional change in road damages. reduce vehicle operating life. meaning that a 10% increase in mileage increases vehicle ownership costs by 4%. shifts to alternative modes. meaning that a 10% reduction in vehicle mileage reduces crash costs and casualties between 14% and 18%. reduced vehicle ownership and land use management strategies are most effective at reducing costs associated with inefficient land use. and that encourage more efficient use of existing parking capacity. These additional (besides fuel and oil) mileage-based charges typically average 10-15¢ per vehicle mile. Equity Impacts . and a proportional or larger change in roadway capacity expansion requirements. Crash Costs Changes in total vehicle mileage tend to cause an approximately proportional change in crashes.4 is used in this analysis. Many TDM strategies directly reduce parking costs. such as traffic calming.Roadway Costs In general. For example. but changes in vehicle trips or ownership do. but a significantly larger change in total crash costs.4. As a result. so the elasticity is 1. which reduces vehicle speeds.

and improvements to transportation and housing choices available to people who are transportation disadvantaged tend to increase equity. .Strategies that reduce unjustified underpricing and subsidies for automobile travel.

13. B9 B10 B11 B12 B8 Salaries & wages of Drivers. COST INFORMATION Cost of Operation Variable Cost (Rs.Name of the manufacturer: Address of the Manufacturer: Statement of operating cost of own fleet for the period …………. and Tyres and Tubes shall to be amortized over its useful life. 12. . 8.usage Inward Transport Cost (B14 *A7 /A9) Outward Transport cost (B14 * A8/A9) Transit insurance for inward movement Transit insurance for outward movement Total transportation cost for inward movement (C1 +c3) Total transportation cost for outward movement (C2 + C4) Note: 1. tube and Battery Spares Repairs & Maintence Other variable cost (Specify) Total Variable Cost (B1 to B7) 10. permit fee and Taxes Depreciation Other Fixed Costs (Specify) B13 Total Fixed Cost (B9 to B12) B14 Total Operating Cost (B8 + B13) C 14. A9 B Quantitative information Number of vehicles Number of trips Goods Transported – inward (UM) Goods transported – outward (UM) Goods transported – inward – Km Goods transported – outward – Km Total goods transported inward – basis of apportionment (specify) Total Goods transported outward – basis of apportionment (specify) Total (A7 + A8) 6. Cleaners and others Fuel & Lubricants Consumables Amortized cost of Tyre. C1 C2 C3 C4 C5 C6 Insurance Licence Fee. A A1 A2 A3 A4 A5 A6 A7 A8 4. Fixed Cost 11. 5. Appendix 1 Sl No. 7. Cost of Battery.) B1 B2 B3 B4 B5 B6 B7 9. Apportionment (Basis to be specified) .

3. . Asset register shall be maintained for determination of depreciation and amortization Separate cost sheet shall be prepared for different types of vehicles. cost.2.

Address of the Manufacturer: i. B1 B2 B3 B4 B (Rs. Statement of Hired Outward Transportation cost for the period ending ………… Sl No. A A1 Quantitative information Quantity of goods transported – outward (UM) 15. Cost information Hired Transport charges Transit insurance Other (Specify) Total Transportation cost (B1 to B3) Name of the Manufacturer: .) 1.Appendix 2 Name of the Manufacturer.

this saddle is decreasing constantly.CONCLUSION Even though it is noticeable the burden that transportation cost represents for the goods traded internationally. . To diminish the influence of the transportation cost over the value of the goods it is mandatory that each country invests in infrastructure strategically. each company is required to implement an integrative approach in planning and controlling the flow of materials from suppliers to end-users. the cost paid for the transportation of the goods is unavoidable. Moreover. However.