Transit Cost Allocation Models

The Three-Variable Unit Cost Model

Three kinds of costs are considered in transit cost allocation models:

• 1.
  Variable costs are those directly linked with providing vehicle transportation, such as fuel, vehicle maintenance, and driver salaries; if transit services are increased or decreased, there would be a change in variable costs, as well.
• 2.
  Semi-fixed costs are costs influenced by the services provided, but with a less direct link to changes in those services, such as the cost of rolling stock.
• 3.
  Fixed costs are long-term costs that are not affected by marginal changes in transit service levels, such as administrative costs and building maintenance.

Most transit cost allocation analyses use the three-variable-unit cost model, with the three variables in this model being vehicle hours (VH), vehicle miles (VM), and vehicles (V). This model assumes that the total cost of operation is directly related to the number of vehicles in the system, the number of miles that they travel, and the hours of service provided, so that the total expenses of the system can be apportioned to these three variables. This model can also be used to calculate the cost of providing a particular route or service, as well as the total costs of the transit system, and can be used to calculate either annual costs or costs for a shorter period.

Although the cost of operating any transit system includes fixed, semi-fixed, and variable costs, not all cost allocation models include all three variables, or the full range of costs within each variable.

In a fully allocated model, variable, semi-fixed, and at least some fixed costs are included, although capital costs are usually excluded. In a partially allocated model, variable costs and at least some semi-fixed costs are included. Fully allocated models are often used to compare different transit systems or different modes of transit, while partially allocated models are often used to forecast the changes in costs associated with proposed marginal changes to services.

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