IMPROVING PROFITABILITY COST

This paper reviews four methods for measuring costs and profitability that have been proposed for use by African railways. The paper assesses limitations in the methodology and scope of each approach, and discusses an alternative recently implemented by the National Railways of Zimbabwe (NRZ). The models that have been recommended for African carriers are stand-alone systems that tend to oversimplify the profitability measurement problem and leave many of the key costing decisions to be made outside the model structure. The approach recently developed at NRZ instead stresses integration of the costing system with underlying accounting, revenue and traffic data, taking into account the operational complexity of NRZ. Costing problems occurring in the transition from state services to commercial operations, including high fixed cost structures and equipment ownership cost distortions, are also addressed. In the process adopted, costs are built "bottom up" from detailed cost accounts and operating data and provisions are made to estimate changes in costs that would occur under structural reform. This method is felt to provide more useful guidance to management than predesigned cost models for general African railway application.

Language

  • English

Media Info

  • Features: References;
  • Pagination: p. 1-16

Subject/Index Terms

Filing Info

  • Accession Number: 00727061
  • Record Type: Publication
  • Report/Paper Numbers: Volume 1
  • Files: TRIS
  • Created Date: Oct 14 1996 12:00AM