18.8 C
Wednesday, July 17, 2024

How to calculate cost per kilometre of trucking in South Africa

- Advertisement -

Calculating the cost per kilometre (CPK) of trucking is essential for any trucking business operating in South Africa. It allows companies to determine the profitability of each load they carry and can assist in determining pricing strategies for future contracts. In this blog post, SA Trucker explores the steps to calculating cost per kilometre in trucking in South Africa.

If the CPK is calculated correctly it helps determine the Rate Per Kilometre (RPK) the trucking company has to charge to make a profit.

CPK is calculated by adding Fixed costs plus Variable costs and dividing by kilometres travelled (CPK=Costs/kilometres travelled).

- Advertisement -

Variable costs make the calculation of CPK tricky as they constantly change.

Step 1: Determine Fixed Costs

The first step in calculating the cost per kilometre in trucking is to determine the fixed costs associated with operating the truck. These costs are constant and do not change based on the distance travelled. Examples of fixed costs include insurance, licence fees, permits, loan repayment, rental of property, security, tracking, safety and equipment maintenance. To determine the total fixed cost for a specific period, such as a month, add all the fixed expenses incurred during that time.

Step 2: Calculate Variable Costs

The second step is to calculate the variable costs, which are expenses that vary based on the distance travelled. These costs include fuel, toll fees, broker fees, breakdowns, and driver wages. To calculate variable costs, record the total cost for each expense during the specified period. There are additional expenses that are harder to quantify on a per-kilometre basis, such as the expense of finding loads.

Step 3: Determine Total Distance Travelled

The next step is to determine the total distance travelled during the specified period. This can be calculated by subtracting the starting distance from the ending distance on the truck’s odometer.

- Advertisement -

Read | How to start a trucking company in South Africa – A beginner’s guide

Step 4: Calculate the Cost per Kilometre

Now that we have determined the fixed and variable costs, as well as the total distance travelled, we can calculate the cost per kilometre. To do this, add the total fixed and variable costs and divide by the total distance travelled. The resulting figure is the cost per kilometre.

For example, let’s say a trucking company which owns one truck incurs fixed and variable costs totalling R310,000 in a month. The truck travelled a total distance of 12,500 kilometres during that time. To calculate the cost per kilometre, we would divide the total costs by the total distance travelled (R310,000 ÷ 12,500km = R24,80 per kilometre).

Step 5: Monitor and Adjust

It is important to continually monitor and adjust the cost per kilometre calculation as expenses and distances travelled may fluctuate. By keeping an accurate record of expenses and distances travelled, trucking companies can make informed decisions about pricing and identify areas where cost savings can be made.

In conclusion, calculating the cost per kilometre of trucking in South Africa is a vital aspect of managing a successful trucking business. By following the steps outlined by SA Trucker in this blog post and regularly reviewing and adjusting the calculations, trucking companies can make informed decisions and maximise their profitability.

- Advertisement -

Related Articles

- SPONSORED -spot_img

Stay Connected

- Advertisement -

Similar Stories