Fifty Plus (50+) - Bicycle Accounting

There was a thread here a few days ago regarding cost per mile of cycling. This got me to thinking. In addition to a training diary, I also keep track of when I replace parts (particularly consumables like chains and brake pads) in order to give me some idea of how long various parts and brands last.

So I set up an Excel spreadsheet and transcribed data for my fixed gear rain/winter bike to get an idea of just what is the operating cost of a bicycle. The bottom line is that over the past five years, I have put in about 31,500 km on the fixed gear bike, spending around $1,100 Canadian on various parts, for an average operating cost of about $0.04 per kilometer.

Details: this includes 9 chains (the cheapest 1/8" chains I can find, since I'm using a 1/8" track cog in back to provide better seating and wear) at $7.50 each (I probably actuall spent less), 8 rear brake pads @ $8, 21 front brake pads @ $5 (probably another overestimate), two saddles to replace two that broke over the five years, one front rim, two bottom brackets, two 42t chainrings, two SPD pedals, and 21 tires (5 front, 16 rear). Some of these numbers are estimates; for example, I haven't been tracking new tires because this bike can use one of two sets of wheels, and it's difficult to get mileage records on tires that may or may not be used at a given time.

I have also not factored in the capital cost of the bike itself. I usually buy the frame separately and attach whatever components I have. The fixed gear bike usually inherits parts from my good bike; for example, I recently put Tektro carbon fiber brakes on my c/f Trek, so the fixie acquired a set of Ultegra dual-pivot calipers which I have not factored into operating cost. But if I were to assess the cost of the bike at $2000 (not unrealistic), then spread over 31,500 km, I have got about $0.06/km out of the bike so far, for a total cost of $0.10/km. Frame price is a fixed cost, so the longer I can make the frame last, the lower the overall cost.

I can also annualize the cost, and this is where accounting tricks can come in. If I straightline the depreciation of the bike over the last five years, I'm still at $0.10/km. But next year, my total cost is back to the $0.04 operating cost only since I've completely written off the bike. I can also depreciate the bike by 20% per year (declining balance), so in year one it costs me $400, but in year two, it costs only $320 (20% of the remaining $1600) or $0.05/km. By year five, the bike costs $164 and I'm down to $0.03/km, or a total cost of $0.07/km.

Of course, this completely ignores fuel cost, which is probably the biggest component of operating expense, but how do you determine what percentage of dinner gets allocated to riding the bike the next day? I remember there was some bike courier a few years back who successfully convinced the Canada Revenue Agency that his lunch should be deductible as a business expense (you can't write off the entire business lunch in Canada) because it counted as fuel, but I forget the details. Well, enough math for today.

- L. Bernhardt, MBA,CMA

Forget the bicycles. We need you as secretary of the treasury.

Would you be able and willing to do my income tax return???

I
Of course, this completely ignores fuel cost, which is probably the biggest component of operating expense, but how do you determine what percentage of dinner gets allocated to riding the bike the next day? I remember there was some bike courier a few years back who successfully convinced the Canada Revenue Agency that his lunch should be deductible as a business expense (you can't write off the entire business lunch in Canada) because it counted as fuel, but I forget the details. Well, enough math for today.

- L. Bernhardt, MBA,CMA

On the food side there are the powerbars and gel packs- that are specific to cycling. But this expense will not be very great. One bite or taste and you don't buy any more. What is more important is how to get the pie FREE. When you work that one out let the rest of us know.

In your costings you have forgotten the negative amounts- Less Doctors fees- less medicines to buy and then the enjoyment factor and how you put a price on this I don't know. Last Time I had as much fun as I have on a bike- It cost me arm arm and a leg, but I can't remember much about it- except for the hangover the next morning

Do you use your bike for chores that others drive to (and perhaps you used to)?

If so, you must figure in as a positive the savings in gas and auto wear, insurance costs (less mileage), etc.

What about global warming? You (and many of us) are reducing global warming by our use of bicycles instead of cars at times. On a macro basis, this is slowing global warming, and there has to be a contribution of $ saved from any negative effects on global warming.

Then again, perhaps global warming saves money (less fuel heating costs? [but don't forget greater air conditioning costs]).

Goodness, one could spend all day figuring this stuff out.

I think I will go for a long bike ride and contemplate this issue. :D

There was a thread here a few days ago regarding cost per mile of cycling. This got me to thinking. In addition to a training diary, I also keep track of when I replace parts (particularly consumables like chains and brake pads) in order to give me some idea of how long various parts and brands last.

So I set up an Excel spreadsheet and transcribed data for my fixed gear rain/winter bike to get an idea of just what is the operating cost of a bicycle. The bottom line is that over the past five years, I have put in about 31,500 km on the fixed gear bike, spending around $1,100 Canadian on various parts, for an average operating cost of about $0.04 per kilometer.

Details: this includes 9 chains (the cheapest 1/8" chains I can find, since I'm using a 1/8" track cog in back to provide better seating and wear) at $7.50 each (I probably actuall spent less), 8 rear brake pads @ $8, 21 front brake pads @ $5 (probably another overestimate), two saddles to replace two that broke over the five years, one front rim, two bottom brackets, two 42t chainrings, two SPD pedals, and 21 tires (5 front, 16 rear). Some of these numbers are estimates; for example, I haven't been tracking new tires because this bike can use one of two sets of wheels, and it's difficult to get mileage records on tires that may or may not be used at a given time.

I have also not factored in the capital cost of the bike itself. I usually buy the frame separately and attach whatever components I have. The fixed gear bike usually inherits parts from my good bike; for example, I recently put Tektro carbon fiber brakes on my c/f Trek, so the fixie acquired a set of Ultegra dual-pivot calipers which I have not factored into operating cost. But if I were to assess the cost of the bike at $2000 (not unrealistic), then spread over 31,500 km, I have got about $0.06/km out of the bike so far, for a total cost of $0.10/km. Frame price is a fixed cost, so the longer I can make the frame last, the lower the overall cost.

I can also annualize the cost, and this is where accounting tricks can come in. If I straightline the depreciation of the bike over the last five years, I'm still at $0.10/km. But next year, my total cost is back to the $0.04 operating cost only since I've completely written off the bike. I can also depreciate the bike by 20% per year (declining balance), so in year one it costs me $400, but in year two, it costs only $320 (20% of the remaining $1600) or $0.05/km. By year five, the bike costs $164 and I'm down to $0.03/km, or a total cost of $0.07/km.

Of course, this completely ignores fuel cost, which is probably the biggest component of operating expense, but how do you determine what percentage of dinner gets allocated to riding the bike the next day? I remember there was some bike courier a few years back who successfully convinced the Canada Revenue Agency that his lunch should be deductible as a business expense (you can't write off the entire business lunch in Canada) because it counted as fuel, but I forget the details. Well, enough math for today.

- L. Bernhardt, MBA,CMA

My guess is that the declining balance method would work if the bike was more productive in its early years than the later years. Otherwise it would be straight line like GAAP. In fact, it might be that all costs would be thrown into a Uniform Capitalization method and amortized over the estimated useful life of the bike or bikes. The annual accounting cycle is usually one year, fiscal or calendar. But for a bike because its really not a profit center in its strictest sense, but rather a cost center or cost alternative center, it can and quite certainly should be measured over a period of years.

That being said, the asset accounting method would be linked to the end user. Some users have different profiles. Some will keep a bike forever and some will not. Some will trade in for an upgrade and let the bike become a backup bike or a beater bike or give it to their kid.

I have a headache now. Thanks guys. :)

Forget about the bike and parts, this winter I was out on a ride and started adding up the cost of , helmet, face mask, lobster gloves, 3 layers of various stuff, cycling jacket, shorts, leg warmers, tights, booties, shoes, socks. Man-o-man, I'm glad I wear the stuff until it rots off (just parted with some BellWeather winter tights that I've been using for 15 years every winter). I wait until the end of a season and buy the fairly good stuff that is on clearance and use it the following season and wear it until it either falls off or my wife spies it in the wash and gives it the heave-ho.

I think clothes can go on the straight-line method and let's try the double-decling balance on the bike and figure out a useful life for the parts, ah the heck with it, let's just enjoy the fact we can ride.

When I add up the cost of tripple by-pass surgery or high blood pressure medications, cycling seems like a bargin.

Wow, what happens to the cost per mile when you ditch the single speed for a $5000 full Campy carbon frame?