Cost & Pricing

Topics: Costs, Cost, International trade Pages: 2 (568 words) Published: July 22, 2011
Transportation Cost & Pricing

Transportation Cost & Pricing
Compare and contrast the cost structures of rail, motor carriers, and air. When you compare the rail cost structure to that of the cost structures of the motor, and air carriers, you will see that the rail carriers have a high structure cost. “One of the characteristics of railroads as previously noted is the level of fixed costs present in their cost structures.” (Coyle, 2011) These fixed cost exists because the ownership of the network and terminals are solo the responsibly of the railroads carriers. Because the railroads operates on a right-of-way system this mean that they are responsible for the maintaining of the tracks they operate on. “Another major component of the railroad industry’s high fixed cost is the extensive investment in the private terminal facilities.” (Coyle, 2011) This up keep of maintenance takes a toll on the industry “in 2007 alone amounted to $9.1 billion.” (Coyle, 2011) In contrast to the motor carriers industry they operate on the highways which are public roads. Motor carriers operate on a high degree of variable cost this is due largely because they do not have to provide their own right-of-way. “It is true that motor carriers do pay fuel taxes and other taxes to defray the cost of providing the highways, but these expenses are variable because they depend on the use made of the highway.” (Coyle, 2011) Air carriers are similarly to that of the motor carriers and that they do not have the expensive of a right-of-way. “Also terminal facilities are publicly provided to a large extent, and the airlines pay landing fees based upon use.” (Coyle, 2011) Which transportation mode has the greatest potential for growth in today's economy? Motor carriers have developed quickly and almost every form of transportation for freight movement depends on in whole or part upon motor carries. So it is my opinion that the motor carriers industry has the greatest potential for growth...
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