Essay on Cost Concepts in Transportation

Before making major purchase decisions brisk consumers examine all costs and benefits. Some transport impacts, such as vehicle operation costs, have been investigated and estimates of their magnitude are accessible. Such impacts, as changes in walking conditions and greenhouse gas emissions, are more complicated to measure.

Key words: cost, accounting, direct costs, indirect costs, market costs, non market costs, economic transfer.

“Accounting” is explained as the science that controls money and other assets. Among its various capabilities, accounting gives the fundamental concepts and those specialized techniques that are specifically able to identify, inspect, analyze, and present transportation’s finance potential. “Cost accounting” is that unique accounting activity that applies a “cost” to each detail of any type that could probably come in a general ledger. The cost accounting principles and methods will be regarded as a tool for freight transportation. Internal costs are borne by a consumer, external – by others. Social are the total costs to society, having both internal and external impacts. Such costs, as traffic jam and break downs are imposed by motorists on other motorists, and are external to personals but internal in a group/sector.

If the only affair is sector level equity, sector level analysis may be acceptable. If the problem is either individual level equity, or economic effectiveness, then external costs should be defined at the personal level. Variable costs are the increasing costs resulting from an increasing change in use, so reflect costs that can be reduced by reduced use, for example, if motorists reduce their annual space. Fixed costs are not affected by use. Sunk costs are fixed costs devolved in the past and can not be recovered. For instance, Buildings, appliances, land are fixed cost, but they can be sold and their value recovered. Such expenses as designing project that is never created or building an invaluable organization are sunk costs. Market costs – goods that are traded in a competitive market (vehicles). Non market costs – goods that are not systematic traded in markets such as air. Price refers to perceived-internal-variable cost.

These are the costs that influence use decisions (a change in fuel prices). Economic efficiency demands that prices show the full costs of generating a good to make market signals. Economic transfers – costs or gains moves that do not change the number of available resources. Economic transfers can contain of non market costs (larger vehicles may raise safety for their residents but increment risk to another road user, a transfer of risk) (Litman). While estimating such impacts it is significant to account for both the gain and the costs of economic transfers. If specific taxes are loaded instead of general taxes, then only the level of tax above the total tax rate is regarded a user fee Modern transport planning and investment decisions conduce to focus on direct market costs. Indirect and non market costs conduce to be undervalued because they are harder to measure.