As an owner-operator or lease operator, it’s very important to know how to figure out if you are profitable, if you operate at cost, or if you operate at a loss. In order to know this, you need to know how much it costs to operate your truck per mile. This is called your CPM (cost per mile).
In order to configure this, you need to know your fixed cost, your variable cost, your fuel cost per mile, and your total miles run.
Fixed costs, such as truck rental, are business expenses that remain constant regardless of the number of goods or services produced. They are constant in the sense that they do not change from week to week or month to month.
Variable cost: a cost that varies with the level of output. Variable costs change as your miles get higher.
Know the difference between the two!
Here is how to configure your Cost Per Mile.
The following numbers are for demonstration purposes; you can adjust them and add numbers as needed.
Fuel Cost Per Mile -To calculate your fuel cost per mile you have to divide your fuel cost by the average miles per gallon.
(Usually 6.5-7.5 miles per gallon)
4.55/7 miles per gallon =
65 cents per mile.
- Truck payment – $700
- Trailer Payment- $180
- Insurance – $250
Add these up
$1130.00 – Total Fixed cost
In order to calculate your variable cost, you need to know your total miles operated and your total gross.
Total Gross– the amount earned before any deductions.
For demonstration purposes, let’s say your truck grossed $6020.00 and the total mileage was 2800 miles)
- (12%) Dispatch Fee – $722.40. (.12/$6020.00)
- Fuel – $1820 (.65×2800 miles)
- Maintenance- $224 (8 cents x 2800 miles)
(Set aside for maintenance by lease, this is optional)
Add these up
$2,766.40- Total variable-cost
Next, you need to calculate how many miles you need to operate within a 7-day period. For example, let’s use 2800 miles a week.
Now, divide the fixed cost for the week ($1,130) by the total weekly miles.
———— = .40 cents
So, your fixed cost per mile is 40 cents per mile.
Do the same with your variable cost.
———— = .99 cents rounded up
Your variable cost per mile is .99 cents per mile.
Add your fixed cost per mile with your variable cost per mile
And your total cost per mile is
$1.39 per mile.
Here’s a handy application – you can plug in numbers and the calculator will calculate the numbers for you.