• Time-and-mileage quotations are commonly based on standing costs plus running costs.
• Before calculating rates, vehicle utilisation must be considered.
• Rates must be based on current and realistic cost information.

6.1 VEHICLE UTILISATION

• A vehicle cannot normally work 365 days each year.
• Unavailability can arise from weekends, public holidays, drivers' holidays, MOT preparation/testing, maintenance, repairs and breakdowns.
• Training example: 365 days less 8 public holidays, 104 weekend days, 20 driver-holiday days, 5 DVSA test/preparation days and 5 breakdown/repair contingency days = 223 available days.
• Monthly average in the example: 223 ÷ 12 ≈ 19 days.
• The material also notes a simplified industry assumption of 45 working weeks × 5 days = 225 working days.
• The older the vehicle, the more likely the breakdown/repair contingency may increase.

6.2 UTILISATION OBJECTIVES

• The theoretical objective is to operate a vehicle 24 hours a day, 365 days a year.
• This cannot normally be achieved, but operators should seek to minimise unnecessary vehicle under-utilisation.
• Higher utilisation helps spread standing costs over more productive work.

6.3 BASIC RATE QUOTATION SCHEDULE

• Use up-to-date costs; outdated figures can produce unprofitable quotations.
• Prepare a schedule for each vehicle or each similar vehicle type and make it available to the traffic office.
• Date the schedule and revise it at least every three months, according to the training material.
• State clearly how long each quotation is valid.
• Training example for an 18-tonne GVW rigid with 12-tonne carrying capacity:
• Annual standing costs: £53,250 before the example profit surcharge.
• Example 20% profit surcharge: £10,650.
• Total standing costs: £63,900 per annum, £1,420 per week and £284 per day, based on 225 working days.
• Example running costs: fuel 30p/km + lubricants 0.5p/km + tyres 2.5p/km + repairs/maintenance 9p/km = 42p/km.
• 20% running-cost profit surcharge: 8.4p/km.
• Total running charge in the example: 50.4p/km.

6.4 CALCULATING RATES – TIME AND DISTANCE BASIS

• A rate quotation schedule can be used to quote for casual daily hire and other jobs.
• A minimum hire period of half a day is commonly stipulated in the material.
• Vehicle and driver are normally charged from leaving the depot until returning to the depot, plus a specified charge per kilometre.
• Always refer to the current rate quotation schedule.

6.5 CALCULATING RATES – PER TONNE BASIS

• Formula: total price to be charged ÷ tonnes carried = rate per tonne.
• Training example: 2 days at £284/day = £568; 450 km at 50.4p/km = £226.80; one night's subsistence/sundry expenses = £30.20.
• Total price = £825.00.
• For a 10-tonne load: £825 ÷ 10 = £82.50 per tonne.
• The example is a one-way price only.
• If the vehicle returns empty, additional time and distance must be included unless a return load is obtained.
• Return loads can provide revenue to help finance the return journey.

6.6 CALCULATING RATES – PER KILOMETRE BASIS

• Formula: total price to be charged ÷ kilometres to be run = rate per kilometre.
• Training example: 1.5 days at £284/day = £426.00; 200 km at 50.4p/km = £100.80; total = £526.80.
• £526.80 ÷ 200 km = £2.634/km, shown in the material as about £2.63/km.
• The quotation should state the included kilometre limit and the additional pence-per-kilometre charge above that limit.
• A minimum charge should also be stated so that the operator is not left unrecovered if fewer kilometres are actually run.
• For simplified exam calculations, standing cost per km can be found by dividing standing costs for a period by expected kilometres for that period.
• Then add the running cost per km and apply the profit markup.
• Training example: £75,000 annual standing costs ÷ 100,000 km = 75p/km; plus 60p running cost = £1.35/km; 20% mark-up = 27p; charge-out rate = £1.62/km.

6.7 CONVERTING STANDING COSTS TO CHARGES PER KILOMETRE

• Standing cost per km = total standing costs ÷ estimated annual kilometres.
• Add standing cost per km to running cost per km to obtain the total cost per km before profit.
• The calculation assumes the vehicle achieves the estimated annual kilometres.
• If fewer kilometres are covered, the operator may fail to recover the full standing costs.
• Minimum kilometres per day needed to recover standing costs = estimated annual kilometres ÷ vehicle utilisation days.
• Training example: 45,000 annual km ÷ 225 utilisation days = 200 km per day.
• If the operator charges for less than 200 km per day in the example, full standing-cost recovery is not achieved.

6.8 CALCULATING RATES – “COST PLUS” (OPEN BOOK) BASIS

• Under a cost-plus/open-book arrangement, the operator provides detailed cost information to the customer.
• The customer examines the costs and negotiates/agrees on the figures with the operator.
• The operator calculates costs normally but does not add the normal profit margin to the cost figures.
• Instead, the customer pays a separate management fee on top of the costs.
• The management fee effectively represents the operator's profit margin.

6.9 COSTING INTERNATIONAL JOURNEYS

• The basic method is the same as UK costing: calculate charge-out rates per day and per kilometre.
• Additional international costs must be identified and recovered.
• Examples: ferry/Channel Tunnel fees, tolls and foreign road-user charges.
• Exchange-rate movements can materially affect the sterling cost of foreign expenditure.
• If sterling weakens against the foreign currency, foreign costs become more expensive in sterling.
• If sterling strengthens, each pound buys more foreign currency.
• Training example: if €1 = £0.90 and the sterling cost is £1,200, convert to euros by dividing £1,200 by 0.90 = €1,333.33.
• Where £1 = €1.10, £1,200 converts to €1,320 by multiplying £1,200 × 1.10.
• For a foreign fuel price of €1.20 per litre at €1 = £0.90, sterling cost = €1.20 × £0.90 = £1.08 per litre.
• International quotations should include all relevant journey costs, the intended profit mark-up and the appropriate currency conversion.
• Training example: a 28-tonne UK-to-Germany movement used 1,200 km one way, 3 days, ferry cost, subsistence, tolls, fuel, tyres and maintenance, then a 15% profit mark-up; the final sterling total was converted at €1 = £0.90.