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What is Avoidable Cost?
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<p>[quote user="wanswheel"]</p> <p>Avoidable Cost, as I understand it, is an imaginary pile of dollars, some more of it flying out the window every day the trains are running. Or it’s a mild sedative. But it doesn’t actually exist, not in the present anyway, unless the cost of running a train today can be avoided. Avoidable Cost is expected to come into existance in the future, though, after a decision is made to stop incurring it. [/quote]</p> <p>An avoidable cost is any cost that could be shed if the activity that drives it is terminated. It is as you point out a future happening. </p> <p>If Amtrak killed the long distance trains, the cost of the consumables, i.e. fuel, water, food, beverages, etc. would go away quickly. It would be avoided. Other costs, such as direct labor, rents, leases, overheads, etc. would take longer. Some costs, however, associated with an operation (long distance trains) might not go away, at least directly, and would have to be allocated over the remaining product lines.This is the tricky part of the equations.</p> <p>Presumably Amtrak, which owns Chicago's Union Station, allocates or charges a user fee for the trains using the station. Some of the station's costs are worn by the long distance trains that use it. How much? Without access to Amtak's books, we don't know. </p> <p>In any case, if the long distance trains were discontinued, the costs of the station, assuming they are not scale-able quickly, would remain. They cannot be avoided simply by discontinuing the long distance trains. However, if discontinuing them freed-up track space, and more State Supported and Short Distance Trains could be accommodated in the station, then costs formerly allocated to the long distance trains could be allocated to the new trains running into and out of the station. </p> <p>People who try to make a business case for the long distance trains will attempt to turn the avoidable cost exercise into as tricky an exercise as one can imagine. However, if Amtrak were a real business that had to respond to markets and at least break even, it would have been out of business decades ago. And a major drag on it would have been the long distance trains, which made no sense when it was formed and make even less sense today.</p> <p>If the long distance trains are a critical component in the nation's transportation portfolio, they should be cut loose from Amtrak, which has a reasonable probability of at least breaking even in the next few years. That could work a variety of good things for the company's employees, customers, and other stakeholders. The new company could be called the USA Passenger Trains - A Government Agency. Not hard to figure where I am coming from.</p>
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