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This report (SW-38is) was written by
Eric R. Zausner
U.S. ENVIRONMENTAL PROTECTION AGENCY
Solid Waste Management Office
1971
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An Environmental Protection Publication
This publication is also in the Public Health Service numbered series as Public Health Service
Publication No. 2034. Its entry in two government publication series is the result of a
publishing interface reflecting the transfer of the Federal solid waste management program
from the U.S. Public Health Service to the U.S. Environmental Protection Agency.
Library of Congress Catalog Card No. 74-611843
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402 - Price 30 cents
Stock Number 5502-0026
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A.3XT
for
stettion
Eric R. Zausner*
The increasing costs and complexities of solid waste hand-
ling require new, more sophisticated management tech-
niques. Data on performance and the costs of operation and
ownership are essential for the use of these management
tools. A good information system is, therefore, a prerequisite
to effective management. Although cost accounting repre-
sents only one part of the total information system, its design,
installation, and utilization can represent the most significant
step in the development of an effective solid waste man-
agement program.
Present information on transfer stations activities and asso-
ciated costs is both inadequate and nonslandardized. Fur-
thermore, the use of transfer stations will continue to ex-
pand as urbanization causes increased concentrations of
solid wastes and a scarcity of proximate disposal sites. The
proposed system provides a guide to the type and quantity
of information to be gathered, its classification, and the
method of collection. It is intended to be of use to municipal
or private personnel involved in transfer station operation
and ownership.
Formerly Chief, Management Sciences Section, Operational Analysis Branch,
Division of Technical Operations.
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Installation of a cosl accounting system can help the trans-
fer station manager control the costs and performance of
operation and also plan for the future. The system can be
implemented as presented or modified to meet the specific
needs and problems of the potential user.
The relationship of the transfer station to the total solid
waste management system is shown in Diagram I. The ac-
counting procedure can be utilized with all types of trans-
fer operations: compaction and noncompaclion, truck trans-
fer, and hauling by railroad cars or barges. In the last two
cases, some provision may be needed to account for disposal
charges.
System Benefits
Some of the more important advantages are:
1. The system facilitates the orderly and efficient collection
and transmission of all relevant data. In fact, most of the
data to be recorded are probably being collected already,
although perhaps only sporadically and inefficiently. Hence,
the added cost of installing the proposed system is minimal.
2. Reports are clear and concise and present only the amount
of data required for effective control and analysis. They can
be understood and completed easily by station personnel.
3. The data are grouped in standard accounting classifica-
tions. This simplifies interpretation of results and comparison
with data from previous years or other operations. This, in
turn, allows analysis of relative performance and operational
changes.
4. The system accounts for all relevant costs of operations.
5. Because the system delects high costs and identifies their
underlying causes, the supervisor can control expenses more
effectively. Similarly, performance and efficiency may be
monitored and controlled.
6. Accountability is superimposed on the system to indicate
who or what is responsible for the increased costs.
7. The data provided are in a form that aids in the short- and
long-range forecasting of operating and capital budgets. Re-
quirements for equipment, manpower, cash, etc., can be
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estimated lo aid budgeting and planning al all levels of
management. The data are also available for later evalua-
tion and analysis using operations research techniques.
8. The system, with only minor modifications, is flexible
enough to meet the varying requirements of different sizes
of transfer stations.
Cost Centers and Cost Allocation
The complexity of transfer station operations requires a
breakdown and description of operations lo facilitate analy-
sis. In this presentation, the transfer station is assumed to
consist of several interrelated suboperalions, each of which
is analyzed separately. These suboperations are called cost
centers because expenses are accumulated separately for
each of these functional activities (Diagram II). Analysis and
control are simplified if excessive costs or inefficiencies can
be traced lo a functional activity or area of the facility.
The number of cost centers required increases as the size
and complexity of operations increase. Additional cost cen-
lers, however, require the collection of more data, and this
increases costs. In most cases, transfer operations would
include activities at the transfer station as well as the final
haul lo ihe disposal site. In this event, three cosl centers
would probably be able lo gather adequate information
without incurring excessive data collection costs. The Trans-
fer Operations cost center and the Wasle Transport cosl cen-
ler are called direcl cosl cenlers because they are directly
associated with transfer and haul operations. Repairs and
Maintenance is an indirect cosl center. All repairs and main-
tenance expenses are accumulated in il and then allocated
lo ihe other cenlers based on the amount they have incurred.
Because repairs and maintenance costs can be a large per-
centage of lotal expenses, the use of a separate center focuses
attention on this crilical area.
If railroad cars or barges are used, the cosl of the final haul
may nol be included in a separate center but be accounted
for as a lolal charge for both final haul and disposal.
The cenlers classify costs by one of two functions opera-
tions and financing and ownership. Operating cosls include
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labor, parts and supplies, utilities, external charges, and
overhead. Financing and ownership costs consist of depre-
ciation and interest. Table I summarizes these costs and
presents brief definitions of each.
There are many alternatives for actually allocating operat-
ing costs. A straightforward method for each type of expense
will be outlined. Labor charges should be allocated to the
cost centers based on the number of hours employees worked
in each and on their respective wage rales. Parts and sup-
plies include oil and gasoline as well as any materials used
for repairs and maintenance. Oil and gasoline costs are
assigned directly to the Waste Transport cost center because
they are incurred by its vehicles. All other parts and sup-
plies are allocated to each direct cost center after being
recorded in the Repairs and Maintenance cost center. Repair
charges levied by other municipal departments or private
firms are also allocated to the direct cost centers after being
recorded in the indirect cost center. Utility costs are incurred
by the Repairs and Maintenance and the Transfer Operations
cost centers. These expenses can be divided between them
on the basis of an engineering estimate or, for simplicity,
they can be assigned completely to the Transfer Operations
cost center. General overhead, which includes supervision,
administration and charges from other departments (payroll,
accounting) can be allocated equally to each cost center or
on the basis of the number of employees each has.
Finally, costs accumulated in the Repairs and Maintenance
cost center are allocated to the two direct cost centers based
on the expenses each has incurred. Their sum. is the total
operating cost.
Capital costs are easily associated with each of the direct
cost centers. For instance, the capital cost of transfer vehicles
can be associated with the Waste Transport center, while the
purchase of scales can be included in the Transfer Opera-
tions cost center. Depreciation for each center can be calcu-
lated with these capital costs and estimates of their expected
useful lives. Total interest cost can be allocated based on
the proportions of capital utilized in each center.
These allocation procedures are illustrated in Diagram II.
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TABLE I
SUMMARY OF COST TYPES
Labor (1)
Parts and supplies (2)
Utilities (3)
Overhead (4)
TOTAL OPERATING COSTS
Depreciation (5)
Interest (6)
TOTAL FINANCING AND OWNERSHIP COSTS
TOTAL COSTS
(1) Labor includes all direct wages, overtime pay and fringe benefits.
Fringe benefits include the costs of group insurance, social security,
pensions, vacation benefits, etc.
(2) Parts and supplies include oil, gas, grease, repair parts, miscellaneous
supplies, etc.
(3) Utilities include electric, natural gas, water, etc.
(4) Overhead includes supervision, payroll and accounting services by
other departments, liability and property insurance, taxes, and external
charges. External charges include audits, contractual services, etc.,
when they are performed by other municipal departments, private
contractors or consultants.
(5) Depreciation may be calculated using either straight line or accelerated
methods.
(6) Interest should represent actual costs of funds.
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The actual system is designed to facilitate the accumulation
and allocation of costs lo the centers.
Forms and Reports
Information flows through the cost system by way of eight
reports (Diagram III). They transmit data collected in the field
for use at various levels of supervision and management.
The reports are most easily grouped into those that are
primarily used to collect data on operations and those that
are used to reduce and analyze for decision making and
control.
Reduction and presentation cannot be accomplished unless
all pertinent activities and cost information are recorded
daily. If this is not done, the data cannot be retrieved later.
Transfer station personnel, supervisors, and others involved
in operations primarily use Forms 1 through 4 to record the
data required.
Weekly labor report (Form 1). Daily entries of labor activ-
ity are recorded in duplicate at the site by the foreman or
supervisor. One copy is forwarded to the payroll department
for determining weekly wages. The supervisor or the ac-
counting department uses the other copy to compute the
total hours worked and to assign the lime and associated
costs lo the cost centers.
Daily truck record (Form 2). This form shows the quanti-
ties, sources, and types of solid waste delivered to the trans-
fer slalion. The number, identification, and net weight of
outgoing transfer vehicles are also recorded. Each delivery
or departure is entered by the weighmasler. The form is
forwarded to the accounting department at the end of each
monlh. In addition to using recorded weight data to bill
public and private users laler, the sources and types of waste
data are useful in special analyses of trends, compositions,
and distributions of solid wastes in the community.
Transfer station maintenance record (Form 3). This form
accumulates the activities and associated costs of repairing
and maintaining the transfer station. Entries are made only
when repairs are undertaken. These data are particularly
useful in anlyzing maintenance department performance,
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DIAGRAM III
REPORTS AND INFORMATION FLOW
From purchase
records or x
a survey /'
Equipment and
facility inventory
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Weekly labor
Truck record
Station
maintenance
Vehicle
maintenance
Wage rates, utility bills,
charges from other departments
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DAILY TRUCK RECORD
FORM 2
TRANSFER STATION
SIGNATURE .
DATE:
1
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Truck ident*
TOTALS
Time
X
Incoming wastes
Source
X
Type
X
Weighted load
X
Weight empty
or tare wt.
X
Net amount of wastes
Incoming
Outgoing
Instructions: To be completed by weighmaster for each delivery of wastes or
departure of transfer vehicle.
Symbols:
Source: R (residential), C (commercial), I (industrial)
Type; T (tires), G (garbage), etc.
"Truck ident. is # of public truck; if private vehicle list name of company for
billing purposes. Also identify transfer vehicles by number, driver's name, and
type (barge, railroad car, etc.).
11
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FORM 3
STATION MAINTENANCE RECORD
STATION IDENTIFICATION
For Period
Date
Equipment or part
of facility repaired
Type repair
Hrs.
station
was down
Labor
hrs.
Parts
description
Labor
cost
Parts
cost
External
charges
Overhead
cost
Total
12
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equipment availability, and equipment repair costs in the
Transfer Operations cost center.
Vehicle maintenance record (Form 4). This form accumu-
lates the activities and associated costs incurred in maintain-
ing the transfer vehicles. A separate sheet is kept for each
vehicle, and entries are made only when maintenance or
repairs are undertaken. These data are useful in analyzing
individual truck efficiencies and repair costs in the Waste
Transport cost center. The data on this form and those on
Form 3 represent the overall activity and costs in the Repairs
and Maintenance cost center.
Equipment and facility inventory (Form 5). This form is
completed when construction is finished or when the cost
system is first implemented. It is updated only when im-
provements or new equipment are constructed, purchased,
or sold. In addition to collecting the data required to calcu-
late depreciation for the period and allocating it to cost
centers, the form also summarizes the bond and interest
information needed to arrive at total costs of financing and
ownership.
Forms 6 through 8 are completed less frequently,- these
intervals depend on the type of information transmitted. To
be effective, certain types of control and analysis require
more frequent feedback than others. Forms 6 through 8 re-
duce the data contained in the first five as well as other
information available to the accounting department.
Operations summary (Form 6.) This report summarizes
system operations and its associated operating costs. The
report can be for the whole system or for individual stations,
since it is a critical cost control mechanism. The report should
be prepared monthly. The accounting department compiles
it and forwards copies to the supervisor and the head of the
sanitation department. The total unit costs presented, as well
as unit costs for the various centers, indicate where excessive
expenses were incurred. In addition, various measures of
efficiency are shown to isolate the cause or causes of high
operating costs. For instance, "tons'number of trips to the
disposal site" adequately measures truck utilization in the
Waste Transport cost center. This measure can help improve
scheduling and reduce costs.
13
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VEHICLE MAINTENANCE RECORD
FORM 4
TRUCK IDENTIFICATION
For Period .
DATE
TOTALS
Odometer
reading
X
Type of service
or repair
X
Mrs.
down
Labor
hrs.
Description
parts and supplies
X
Labor
cost
Parts
cost
External
charges
Overhead
(rate hrs.)
Total
cost
14
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FORM 6
OPERATIONS SUMMARY
For period.
to
TOTALS
TRANSFER
OPERATIONS
COST
CENTER
WASTE
TRANSPORT
COST
CENTER
REPAIRS
AND
MAINTENANCE
COST
CENTER
Factor
Tons received
Average tons/day operated
Total operating cost
Total operating cost/ton
Labor cost/ton
Parts and supplies cost/ton
Utilities cost/ton
External charges cost/ton
Overhead cost/ton
"Cost center" cost/ton
Tons/hr. of operation
Percent volume reduction ]
"Cost center" cost/ton
Tons/number of trips to disposal site
Labor hrs./ton
"Cost center" cost/ton
Repair and maintenance
cost/hr. of operation
Waste transport percent
Transfer operations percent
Percent time vehicles down
Percent time station down
Amount for this period
Percent
Budget
variance from
Budget last period
16
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Vehicle evaluation report (Form 7). This form is optional.
Il is not needed if barges or railroad cars are used because
transport costs are incurred on a contract basis.
The data accumulated on this form represent the total and
individual costs of operating the transfer vehicles. Statistics
are accumulated separately for each piece of equipment, and
this allows efficiency and cost to be evaluated. The data
may also be used to determine when to sell or trade a vehicle.
Since this decision involves long-term assets, only quarterly
or semiannual reports are necessary. More frequent prepara-
tion would not substantially improve decision making that
would minimize operating costs. Il may be desirable, how-
ever, to prepare reports on a truck if it exceeds a given level
of repair charges. For instance, each vehicle's repair expenses
can be compared with the average for all the vehicles/ when
a vehicle exceeds this average by 25 percent or 50 percent, it
can be singled out for further analysis. The accounting de-
partment, which prepares this form, sends a copy to the opera-
tional supervisor and the head of the sanitation department.
Tolal cost summary (Form 8). All the activities and costs
associated with transfer system operations for a selected
period are compiled on this report from data available in
the Transfer System Operations Summaries and on the Facil-
ity and Equipment Inventory forms. The combined operat-
ing expenses and the depreciation and interest figures repre-
sent the total cost of operations for the period. The report
also summarizes the sources and amounts of revenues asso-
ciated with the system's operation. The accounting depart-
ment can complete this form quarterly or semiannually and
send it to the head of the sanitation department or his
equivalent.
Report Flow Summary
A brief summary may help to put the system in perspec-
tive. The personnel directly engaged in transfer activities
complete data accumulation forms daily and transmit them
periodically to the accounting department. The latter col-
lates the information and adds additional data it has on file
to complete summary reports on performance, activity, and
costs. These forms are then sent back to the supervisor for
17
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VEHICLE EVALUATION
FORM 7
GARAGE
For period.
.to
Equipment
identification
TOTALS
AVERAGES
BUDGET
Total
miles
X
X
Hrs. down
Mrs. down/total hrs.
X
Repairs and
maintenance cost
18
Fuel cost
Repairs and
maintenance
cost/hr.
X
Fuel
cost/hr.
X
Total
cost/hr.
X
Total
cost
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control purposes. In addition, selected summary reports on
total cost and equipment performance are compiled and
forwarded to the supervisor and to his immediate superior.
System Utilization
Only with efficient and intensive utilization of the informa-
tion generated by the accounting system and its forms can
the additional time, effort, and money required to implement
and maintain it be justified. The system's intensive use pro-
motes two major objectives quality control and cost control.
Reduce costs must be accomplished without degrading oper-
ating quality. Similarly, quality is interrelated with the costs
of obtaining it.
All the factors that affect the quality and effectiveness of
transfer system operations can be translated into costs. Cost
control does not call for economizing at the expense of qual-
ity. On the contrary, once an acceptable level of operations
and costs has been achieved, the system can help the super-
visor maintain it.
Effective control requires timely recognition and assign-
ment of responsibility for any increased costs. Comparing
unit costs (cost per ton of waste transferred) with the current
budget and that for the corresponding period of the preced-
ing year helps pinpoint excessive expenses. This approach
facilitates the analysis of costs, independent of changes in
the level of activity. Cost center breakdowns help single
out the factor or person responsible for increased expendi-
tures, and this allows corrective action to be initialed.
20
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