According to data provided by British Rail to the Mergers and Monopolies Commiss

Question

According to data provided by British Rail to the Mergers and Monopolies Commission, the 1988 costs of a Sprinter (Class 150/2) train were: Capital Cost 525,000, Annual costs (per unit): Depreciation 26,300, Overhaul and maintenance 32,600, Stabling and cleaning 9,400, Total annual cost of: 2 drivers 20,200, 2 guards 15,600, Mileage costs (per mile): Maintenance 0.15, Fuel 0.126. Assuming 90,000 miles annual use, what is the marginal cost per train mile?

0.150

0.126

0.276

0.155

0.150

0.126

0.276

0.155

Explanation / Answer

Marginal cost is the additional cost of running a train one extra mile. The additional cost is only of the Mileage costs of Maintenance and Fuel. Hence the marginal cost will be 0.15 + 0.126 = 0.276

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