Operating Your Business as a Business

[Gary and Linda]

I just read the article on Operating Your Business as a Business, and I have to say that in my opion, there are a few misconceptions in that article. The article states (under variable expences, that "Fuel, tires, maintenance, and meals and lodging are examples of variable costs." and that "some of these expenses will decrease per mile as you increase the number of miles". NO offence to the author of the article, but that's not really correct. Fuel, tires, and maintenance are all directly related to miles--the more miles you put on, the more you pay for these items. They are basically a fixed-cost-per mile expence.

[greg334]

Yes and No.

You probably already know how projections work and how to read a financial statement so please don’t be insulted.

The idea is to figure your overall cost per mile for all operating expenses based on your actual mileage. In doing so, the Fuel, tires, and maintenance are considered variables due to the fact that there is no real cost until you purchase them. As my accountant says, they are consumables.

Real world for me is that my truck cost me $.48 per mile less than 1500 miles a week. From 1500 to 2000 miles a week it cost me $.45 per mile and at 2500 a week it is $.43 per mile. This is with a $2.50 per gallon price and with all kinds of things put aside for truck related expenses.

[Roadpilot]

>Yes and No.
>
>You probably already know how projections work and how to
>read a financial statement so please don’t be insulted.
>
>The idea is to figure your overall cost per mile for all
>operating expenses based on your actual mileage. In doing
>so, the Fuel, tires, and maintenance are considered
>variables due to the fact that there is no real cost until
>you purchase them. As my accountant says, they are
>consumables.
>
>Real world for me is that my truck cost me $.48 per mile
>less than 1500 miles a week. From 1500 to 2000 miles a week
>it cost me $.45 per mile and at 2500 a week it is $.43 per
>mile. This is with a $2.50 per gallon price and with all
>kinds of things put aside for truck related expenses.


Not only that, but your "fixed costs" vary too. Tires are not always the same price, you usually aren't fixing the same thing twice and the price of fuel might only fluctuate a few cents ( during NORMAL periods). Example: I use Mobil 1 synthetic oil in my vehicle, sometimes I pay $6.00 a quart, sometimes $4.00 a quart.

Granted these are small differences, but they can add up over time (or miles as the case may be)