Having at the outset deducted approximately one-quarter of our total expenditures to meet fixed charges, we may now proceed to analyze those outlays which remain. And this is to be done, always keeping in mind the fundamental distinction between constant and variable items. From 1887 until 1906 the operating expenses of American railroads were allocated in the four following groups:
(1) Maintenance of Way and Structures (2) Maintenance of Equipment (3) Conducting Transportation (4) General Expenses
This grouping under the new law of 1906 has been somewhat redistributed. But inasmuch as most of the statistical data as yet available is presented under the above-named heads, we shall adhere to that classification. This we may the more properly do, as our object is to show the general bearing of railroad expenditures upon rate making, rather than specifically to analyze cost accounts. For this simple purpose the above arrangement is entirely adequate.
The general nature of each of these above named groups is roughly expressed by its title. Under the first, Maintenance of Way, are segregated those outlays which have to do with the up-keep of the roadway and permanent structures in proper shape for the moving of trains. It includes, besides such obvious items as ballast, rails, ties and the wages of track men, every outlay on permanent structures, such as bridges and tunnels, stations, grain elevators, stock pens, gas, oil and water tanks, and even scrap bins and eating houses. To these are added scores of other minor items, such as maintenance of telegraph lines, fences and cattle guards, signal plants and docks and wharves. Every kind of tool or appliance used, and all wages paid in connection with the maintenance of this part of the property are included. Insurance and even the legal costs and damages incurred in connection with accidents, are all assigned to the appropriate property. The second group, Maintenance of Equipment expenses, includes, as the name implies, the proper care and preservation of all the rolling stock in good working order. Repairs and renewals of all locomotives, cars and vessels, form the largest single items. But all shop machinery and power plants are included, with specification in detail of every appliance needed in connection with the work, as, for example, over one hundred and fifty possible items from "adze handles, ammonia and auger bits" down to "wire brushes, wrenches and zincs." Conducting Transportation expenses, the third group, are supposed to provide for the actual movement of traffic. The two former classes of expenditure having put the fixed plant and rolling stock in condition, it remains to operate the property. Under this head is chargeable all costs of coal and supplies, wages of train hands from enginemen to car porters, yard, station, switch and signalmen and telegraph operators. To these are added such items as "purchased power," "cleaning cars," "clearing wrecks," and "losses and damages"; in short, every conceivable item of expenditure which can be assigned to the service as distinct from the mere property.