ME 2027 Performance and Cost Analysis KTH 2007 By Johan Forsberg and Filip Westerlind

1. SJ ME 2027 Performance and Cost Analysis KTH 2007 By Johan Forsberg and Filip Westerlind

2. Presentation of SJ SJ is the mayor rail road company in Sweden and it´s 100 % government owned We have chosen to look at the cost of running one train Among the many cost models used by SJ we decided to look at CVP, a form that evaluates the time dependent way of supply and demand sales

3. Fixed Cost Price Fixed Cost Quantity The total cost of running a train is almost the same whether the reservations are made to it´s fully capacity or not

4. Fixed Cost Price Revenues Fixed Cost Quantity The revenues must cover the fixed cost before the company could show profit

5. Optimum Price Model Price Total Quantity Total Cost Quantity Total cost is constant and the total revenue is changing depending on the quantity

6. Optimum Price Model Price Total Quantity Total Cost Quantity • Fixed cost can change and therefore the total cost may change. The fixed cost is in reality a partly fixed cost. • For example, when an additional wagon is needed due to increased capacity the fixed cost will raise. In this scenario adding a wagon is a fixed cost rather than a variable cost.

7. Supply/Demand Price Supply Demand Quantity The above example illustrates traditional thinking of supply and demand.

8. SJ´s Model • In SJ´s case demand increases closer to departure time, i.e. demand depends on time • The supply is constant, because the number of seats available are same • The sooner the ticket is bought the cheaper it is for the customer • By offering prices according to demand SJ maximizes the reservations, i.e. they change prices frequently over time

9. SJ´sModel Yieldutveckling totalt per klass, X 2000

10. Volymutveckling X 2000 Göteborg