-------

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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.

-------
  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
   0
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                        Weekly labor
                        Truck record
    Station
 maintenance
    Vehicle
 maintenance
                                                                            Wage rates, utility bills,
                                                                         charges from other departments
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I evaluation / ~~


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                                                                                flow

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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

-------
  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.
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