Costing



Costing and Profit Measurement System

Typically, the SCPM system combines traffic, revenue, physical, and cost data from many railway systems. This includes waybilling or ticketing, revenue accounting, cost accounting, and various operational systems. The basic process is shown in Figure 3.

Traffic movement information comes from railway operating systems that record and track traffic, such as the waybilling system for freight, and the ticketing system for passengers. These systems provide basic movement characteristics—origin, destination, weight, wagon type, and freight commodity, or origin, destination, and service class for passenger traffic. The movement can be matched to operational databases to find the physical characteristics of the movement that correspond to the railway&rsquos cost drivers. Examples of such physical factors are the freight movement ton-km, equipment type, and shipment time.

Cost information comes from the railway’s cost accounting system (or systems). The quality of the SCPM system output is constrained by quality and detail of cost data available. In a high quality accounting system, a number of descriptors are recorded together with the amount of each expenditure:

  • Functional expense. For which function was the expense incurred? Examples are train operations, track maintenance, and station operations.
  • Natural expense. What type of good or service was purchased? Examples include diesel fuel, electricity, rail, ballast, and track labor.
  • Service/profit center. For which service or profit center was the expense used? Examples are intercity passenger service, merchandise freight, intermodal.



  • Geographic location. Where was the expenditure used? Geographic location may be defined by routes or line segments (Astana to Karaganda), administrative regions (Northern Division), or specific location (Almaty), depending on the location breakouts of interest to the railway. Often the most specific location identifier is used, and can then be aggregated into broader location groups according to the railway&rsquos preferred system.

  • Cost center. Which organizational unit has budget responsibility for the purchase? Examples are Track Department, Northern Division, Baku Locomotive Workshop, or Accounting Department. In the case of multiple layers of budget responsibility, the most specific identifier is used and can then be aggregated into broader groups.

  • Capital project budget. Which project? Examples are rebuilding a bridge, or double tracking a line.

  • Customer/Special Service. Is the expenditure for a single customer? Which one? The customer would be tracked only if significant recurrent expenditures are made. Examples are unit train service for a coal company, intermodal trains for sea/land services, or special unloading services for a chemical company.
A variability master file is created that defines the physical factor—cost driver—with cost varies and the proportion of the cost that varies at the defined cost level. Costs are associated with traffic by applying the relationships in the variability master file to the physical factors associated with the traffic. This process often contains many layers of decision rules.

Revenue information from the railway accounting system is matched to movement information and costs, using a movement identifier such as the waybill number in both sets of data.

The result is a detailed database that includes traffic information, revenues and costs. This database can be used to generate cost and profitability reports by service type, customer, commodity, line segments and other classifications. The database may also feed other analytical tools, such as tools for estimating costs for prospective movements, based on their physical characteristics.

    
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