Cost Recovery Systems and Fund Structures Flashcards
Why is it important to track vehicle expenses?
- classification of vehicle expenses for internal control and management.
- measure the effectiveness of cost controls.
Describe the RACE system.
Recommended Automobile Classification Expenses.
3 main categories of vehicle expenses – fixed, operating and incidental.
Describe fixed expenses and give some examples that are common in fleets.
Expenses that incur without the impact of operations. Examples include depreciation, interest, administrative overhead, insurance, license and fees.
What are the ‘rules of thumb’ when deciding whether an expense is fixed or not?
- If I acquire a vehicle and leave it in the lot, the costs incurred are fixed.
- If I acquire a vehicle and add an upfit but leave it in the lot, the upfit cost would be considered a part of the capitalization of the vehicle.
- If a vehicle needs refurbishment and the cost of it is more than 50% of the vehicle’s value, then the cost of refurbishment is part of a recapitalization cost.
What are operating expenses?
Expenses considered to be anything that is consumed during the course of the vehicle’s life. These expenses increase with operations.
List some common fleet operating expenses.
Fuel, oil, tires, maintenance.
Should vehicle repairs and refurbishment be considered operating expenses?
Repairs can be considered a subset of an operating cost since they’re not normal or reoccurring.
Refurbishment is recapitalizing a vehicle and bringing it back to operating condition.
What are incidental expenses?
Incidental expenses include everything else. Not maintenance or adding capital value. Examples include car washes, parking fees, toll costs.
Explain other terminology for expenses that may be used in fleets.
Direct costs – operating costs or costs that can be linked directly to fleet operations.
Indirect costs – includes some fixed costs and incidental fleet expenses.
Overhead costs – indirect costs.
What is a cost allocation system?
Allocating costs with one or more cost objectives such as products, departments or divisions.
What does the Cost Allocation Spectrum illustrate?
Multiple approaches available for cost allocation.
Describe the positions identified on the Cost Allocation Spectrum.
Position A – doesn’t track fleet operation costs
Position B – doesn’t track but knows majority of their fleet costs.
Position C – knows their costs and allocate to customers, but doesnt recover from billing.
Position D – knows and allocates operation costs and bills customers.
Position E – comprehensive system that tracks costs even incidentals and overhead costs, allocates/charges customers through different rates and/or surcharges.
What is a General Fund?
When a fleet department receives an annual budget allocation to cover costs of fleet operations.
What are the determining factors in adopting a General Fund?
The type of organization, management goals and expectations.
What is an Internal Service Fund (ISF)?
account for the financing of goods and services provided by one department to other departments on a cost reimbursement basis. Internal service funds shouldn’t generate profit.
