Tariffs
When setting a tariff it is desirable to set it such that the revenues would recover all costs plus profit; however, current market forces may not permit such tariffs. Tariffs may not be reflective of the costs on all segments of the railways because costs will vary by segment. As a result, the railway may operate at a loss in one area while in another operate with a large profit thus balancing out. If the railway can not cover even the Direct Variable Cost, given the market conditions, then perhaps the decision might be to forgo this traffic altogether. Alternatively decision-makers could ask what measures could be taken to reduce the cost, so that the revenue will offset the cost.
Read more about this topic: OSCAR Railway Costing