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Current Cost Accounting Practices in Transportation Industry Research Paper

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Updated: Jul 19th, 2021

Introduction

The transport industry in the United States has undergone tremendous changes over the past decades as stakeholders embrace technology and new accounting standards. According to Hooper and Murray (2018, p. 28), private sector players in the transport sector have been keen on lowering the logistics cost as a way of lowering the overall cost of production to remain competitive in the market. On the other hand, the government is focused on improving transport infrastructure as a means of promoting economic growth in the country. The current cost accounting practices in the transport sector majorly focus on simplifying the processes of recording, analyzing, classifying, and allocating resources with the aim of enhancing productivity. The management should have easy access to accounting data needed to make critical decisions within the shortest period possible. In this paper, the focus of the researcher is to analyze the current cost accounting practices in the transport industry.

Research Paper Subject (RPS)

Current Cost Accounting Practices in Transportation Industry

Hooper, A. & Murray, D. (2018). An analysis of the operational costs of trucking: 2018 update. New York, NY: American Transport Research Institute.

This article focused on determining the actual cost of trucking in the United States since 2008. The authors of this document were concerned about the conflicting reports by sector players. The American Transportation Research Institute has been working with various stakeholders both in the public and in private sectors to improve conditions, lower costs, and enhance efficiency in delivering products. The study used qualitative methods to analyze the current accounting trends and the average cost of trucking in the country. They found out that the cost of trucking in the United States varies from one state to another. Factors such as extreme weather conditions, fragility, and perishability of the product, and the weight are some of the factors that have a direct impact on the cost of trucking in the country. The study found out that some of the small scale trucking companies are not keeping accurate accounting records because of factors such as limited accounting knowledge and the desire to reduce their taxable income.

Redding, S. J. & Turner, M. A. (2014). Transportation costs and the spatial organization of economic activity. NBER Working Paper Series, 20235(1), 1-59.

In this study, the researchers were interested in establishing the relationship between transportation cost and spatial distribution of economic activity. The researchers reviewed the literature on this topic to find out what other scholars have found out in this study. Their findings revealed that an improvement in transport infrastructure has a direct positive impact on the cost of operation among trucking companies. When the road infrastructure is developed, it takes a shorter period for trucks to move from one geographic location to another. Cases of a breakdown of vehicles also become less common, further lowering the cost of operation for the transport companies. When the cost of operation is low, these firms can afford to charge lower prices on the services they deliver. The study shows improved economic activities within a region also increases the number of clients within a region. Firms would then benefit from economies of scale, which would allow them to lower their prices even further.

Glaeser, E. L. & Kohlhase, J. E. (2004). Cities, regions and the decline of transport costs. Papers Regional Science, 83(1), 197-228. doi: 10.1007/s10110-003-0183-x

The study focused on determining the relationship between the growing urban centers in the United States and the reduction in the cost of transportation. In the past, firms considered it more appropriate to locate their companies closer to the raw materials. However, these scholars argue that the trend is changing, and many of the large corporations currently consider it advisable to locate their companies closer to the market. It is becoming cheaper to move goods than to move people. Locating firms closer to the market would mean that a firm would not need to spend more in moving the completed products to clients. The firm can have an arrangement with its suppliers to deliver the products to the firm’s premises as a way of lowering the overall cost of accounting. The strategy is motivated by the desire to lower the unit cost of production as the only way of remaining competitive in the market.

United States Department of Transport. (2009). Assessing the full costs of congestion on surface transportation systems and reducing them through pricing. New York, NY: U.S. Department of Transportation.

In this article, the researcher was interested in determining the cost of congestion on surface transport systems and means through which such problems can be addressed. Authors of this article collected both primary and secondary data to inform their findings and the conclusion they made. The transport sector has become a critical player in economic progress in the country. However, the scholars found out that the demand for transport services has the capacity, resulting in major congestions in highways and roads leading to major cities. The problem affects transport companies, passengers, and government because of the significant reduction of efficiency and increased cost of production. The scholars believe that promoting alternative means of transport such as the use of railroads is the best way of dealing with the problem.

Winston, C. W., & Mannering, F. (2013). Implementing technology to improve public highway performance: A leapfrog technology from the private sector is going to be necessary. Economics of Transportation, 4(13), 1-8.

The article focused on determining ways through which the performance of the United States transport system can be improved. Relying on data from both primary and secondary sources, they found out that the current practices in the transport sector may not be sustainable. Privatization is one of the best ways of improving performance within a given industry. However, there should be a clear way in which the private and public sectors of the economy should coordinate to ensure that the desired level of success is achieved. It is the role of the government to set standards. It should also create a sustainable environment where private players can prosper. However, allowing private sector players to dominate the transport sector may have a counterproductive impact if measures are not taken to deal with accounting fraud which is becoming common in the country.

Research Paper Outline (RPO)

Introduction

This section provides an introduction to the paper.

Managing Cost of Operation in the Transport Sector

Winston, C. W., & Mannering, F. (2013). Implementing technology to improve public highway performance: A leapfrog technology from the private sector is going to be necessary. Economics of Transportation, 4(13), 1-8.

The performance of the transport sector in the United States may be significantly affected if the government fails to take measures to regulate the activities of private players through better policies. In a market that is highly competitive, firms are struggling to come up with ways and means of lowering their cost of operation as the only means of charging competitive prices. The performance of the sector depends on the output of every individual player within the industry. The government must understand that regulating their practices while at the same time creating a perfect environment for the success of the players is, therefore, critical.

United Nations. (2016). Mobilizing sustainable transport for development: Analysis and policy recommendations from the United Nations secretary general’s high-level advisory group on sustainable transport. New York, NY: United Nations.

The article focused on determining the impact of the transport sector on sustainable development, poverty eradication, and the fight against climate change. The findings revealed that in the developing nations, especially in Africa and parts of Asia, the transport sector plays a critical role in promoting economic growth and combating climate change. On the other hand, the primary focus in the United States and other developed nations in Europe are to reduce emissions of greenhouse gases. The use of road transport among trucking companies is discouraged and instead, the rail system is believed to be the better option. It not only lowers the cost of operation but also lowers the production of carbon gases by significantly reducing the number of large trucks on the road.

Emerging Standards Practices in Cost Accounting

Mallett, W. J. (2018). Trends in public transportation ridership: Implications for federal policy. Congressional Research Service, 7(5700), 4-19.

The focus of the article was to determine trends in public transportation ridership and the manner in which it is affected by federal policies. Their investigation revealed that technology, cost, convenience, and inflation are some of the main factors that affect ridership in the country. The federal government must understand that through its regulatory policies, it has the capacity to promote or discourage ridership in the country, especially in major urban centers where driverless taxis are becoming common. The emerging cost accounting practices are largely based on the policies put in place by the federal government. If the federal policies are favorable to having large trucks on major highways, then accounting policies and practices will promote the practice.

Winston, C. W., & Mannering, F. (2013). Implementing technology to improve public highway performance: A leapfrog technology from the private sector is going to be necessary. Economics of Transportation, 4(13), 1-8.

The article focused on the implementation of technology as a way of improving the performance of public highways. Using information collected from secondary sources, these scholars found out that policymakers have a role to play in enacting laws that would promote well-tested technologies that can improve pricing, investment, accounting practices, and operations on the highways. The aim should always be to use technology for the benefit of both the government and private sector players. Eliminating bureaucratic and political impediments to the introduction of accounting principles is critical to improving the performance of public highways. It helps in addressing conflict among different stakeholders and the desire to engage in malpractices among large trucking companies in the country.

Duranton, G., & Turner, M. A. (2012). Urban Growth and Transportation. The Review of Economic Studies, 79 (4), 1407-1440.

The authors of this article were interested in studying urban growth and transportation in the United States from 1983 to 2003. The findings show that within a period of two years, there has been a significant increase in the population of urban centers in the United States. The number of roads and rails in the country has also increased. However, a comparative analysis of the two shows that population growth has been more rapid than infrastructural development. Such events create an imbalance, which results in congestion on the roads. Subsequently, the congested roads cause delays, inconvenience, and an increase in the overall cost of operation. Improving the infrastructure is one of the most important roles of the government that can help address such concerns.

Accounting Fraud in the Modern Business Environment

Redding, S. J. & Turner, M. A. (2014). Transportation costs and the spatial organization of economic activity. NBER Working Paper Series, 20235(1), 1-59.

The article focuses on the relationship between transportation costs and spatial organization of economic activities within a given region. The researcher conducted a survey to establish the relationship between the variables. The findings show that there is a positive correlation between lower transport costs and infrastructural development within a given region. When the transport infrastructure is developed, population increases, more jobs are created, wages increase, and trade, in general, gets a boost. Such developments tend to discourage accounting fraud if the government creates an enabling environment that promotes business development.

Glaeser, E. L. & Kohlhase, J. E. (2004). Cities, regions and the decline of transport costs. Papers Regional Science, 83(1), 197-228. doi: 10.1007/s10110-003-0183-x

The researchers in this study were interested in establishing the relationship between the growth of cities and the decline in transport costs. The secondary data they collected showed a positive correlation between the growing urban centers and the decline in transport costs. Urbanization creates an environment where a large population lives within a small geographic location. As such, firms do not need to spend more on distribution. Products will be made available to a large customer base within a small location, lowering the cost of transportation. As the cost of transportation falls, the need to engage in fraudulent accounting practices reduces. The trucking companies find it unnecessary to engage in accounting malpractices as they try to cut their cost of operations.

Managing Unethical Practices in the Transport Sector

United States Department of Transport. (2009). Assessing the full costs of congestion on surface transportation systems and reducing them through pricing. New York, NY: U.S. Department of Transportation.

The article focused on discussing the role of public transportation in managing climate change. The authors of this article argue that transport sector is one of the leading emitters of greenhouse gases in the country. The Federal Transit Administration collected and analyzed data from various sources across the country on fuel usage, rides taken, vehicles deployed, and other metrics relating to the public transport sector. They found out that the rate of emission has been increasing at a relatively high rate because of the increasing ownership of cars. Figure 1 in the appendix shows that private cars are the leading emitters of greenhouse gases, followed by bus transit, and light rail transit. The problem can only be addressed through policy change where these players will be expected to go beyond the economics of their trade and consider the impact of their activities on the environment.

Hooper, A. & Murray, D. (2018). An analysis of the operational costs of trucking: 2018 update. New York, NY: American Transport Research Institute.

The author of this article focused on analyzing the operational cost of trucking in 2018. The researcher relied mainly on information published by various entities within the United States. The current cost was compared with that of the previous years to establish a trend. The authors found out that although the current data about the actual cost varies from $ 22 to $ 370 per hour, there has been a consistent increase over the years. The increasing cost of transportation may tempt some of the truckers to engage in accounting malpractices. Government policies may help manage rising costs and discourage such practices. Such policies will be beneficial to both the government and private sector players.

Conclusion

This section provides a detailed summary of the findings.

Marked-Up Complete Research Paper

Emerging technologies and infrastructural developments have redefined the transport sector. According to Federal Transit Administration (2010, p. 1), trucking companies have to deal with emerging trends in the market where firms prefer having their production plants in major cities, which is closer to their market. The primary goal of such initiatives is to ensure that products can be availed to customers within the shortest period possible. Accounting practices are also evolving in line with the changes taking place in the transport sector. New accounting standards are emerging both nationally and internationally as firms struggle to comply with regional and global accounting policies. Companies operating in the global market have a challenging task of ensuring that their books of account meet standards set by different countries where they operate. As such, it is becoming more prudent to use international accounting standards that can be applied in different countries that embracing the national standards (Winston, 2013, p. 795). Firms such as FedEx, DHL, and Maersk Group have to embrace international accounting standards and principles to enable them to operate freely in the global market. In this paper, the focus is to discuss the current cost accounting practices in the transport industry.

References

Duranton, G., & Turner, M. A. (2012). Urban Growth and Transportation. The Review of Economic Studies, 79 (4), 1407-1440.

Federal Transit Administration. (2010). Public transportation’s role in responding to climate change. New York, NY: U.S. Department of Transportation.

Glaeser, E. L. & Kohlhase, J. E. (2004). Cities, regions and the decline of transport costs. Papers Regional Science, 83(1), 197-228. Web.

Hooper, A. (2018). An analysis of the operational costs of trucking: 2018 update. New York, NY: American Transport Research Institute.

Mallett, W. J. (2018). Trends in public transportation ridership: Implications for federal policy. Congressional Research Service, 7(5700), 4-19.

Redding, S. J. & Turner, M. A. (2014). Transportation costs and the spatial organization of economic activity. NBER Working Paper Series, 20235(1), 1-59.

United Nations. (2016). Mobilizing sustainable transport for development: Analysis and policy recommendations from the United Nations secretary general’s high-level advisory group on sustainable transport. New York, NY: United Nations.

United States Department of Transport. (2009). Assessing the full costs of congestion on surface transportation systems and reducing them through pricing. New York, NY: U.S. Department of Transportation.

Winston, C. (2013). On the performance of the U.S. transportation system: Caution ahead. Journal of Economic Literature, 51(3), 773-824.

Winston, C. W., & Mannering, F. (2013). Implementing technology to improve public highway performance: A leapfrog technology from the private sector is going to be necessary. Economics of Transportation, 4(13), 1-8.

Appendices

Appendix 1. Emissions of carbon dioxide per passenger mile

Emissions of carbon dioxide per passenger mile
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