Cost Unit

• A cost unit is the way a cost is expressed so that it becomes useful for comparison and pricing.
• Common road transport cost units include cost per kilometre and cost per tonne-kilometre.
• A total figure such as annual tyre expenditure is less useful than a comparable figure such as tyre cost per kilometre.

Cost Centre

• A cost centre is the vehicle, group of vehicles or fleet to which costs are allocated.
• Examples include a group of 18-tonne rigids or a group of 44-tonne articulated vehicles.
• Costs can be collected for the whole fleet, a vehicle group or an individual vehicle.

Direct Costs

• Direct costs can be directly identified and allocated to a particular cost centre.
• Examples: fuel, drivers' wages, vehicle insurance, VED and tyres.

Indirect Costs

• Indirect costs are business overheads that cannot readily be allocated to one vehicle.
• Also called overheads, administrative costs or establishment charges.
• Examples: advertising, office wages, rent/rates, heating, lighting, telephone costs, executive salaries and premises insurance.
• Indirect costs still have to be recovered through vehicle/customer charging rates.

Fixed Costs

• Fixed costs do not normally vary with mileage or the amount of vehicle activity over a given period.
• Often called standing costs because they exist whether the vehicle is moving or not.
• Examples: licences, insurance and depreciation.

Variable Costs

• Variable costs change according to the amount of vehicle use.
• Often called running costs.
• Examples: fuel and tyres.
• A cost can belong to more than one category: tyres are both direct and variable; insurance is direct and fixed.