Can you estimate the cost of new Programs that your institution is considering adding to your curriculum? New Subjects?

What is the cost difference to teach different student types (domestic, international, in-state etc.) in each Program? Or Subject?

What is the magic ‘breakeven’ student number for each Program? Subject? And how does this change when you need to add tutorials, laboratories, etc?

Welcome to a 5-part series that will provide your institution with some tips on how to answer these questions! Think about any major supplier of goods and services – rarely will a new product come onto the market, or continue to be on the market, without the supplier already knowing the answers to these types of questions. For example, a car manufacturer will know exactly what the cost to build is, how many units they need to sell to break even, and what the ideal price point is for both existing and potential new products.

Should Colleges and Universities be any different?

To answer these types of questions, many institutions develop ‘Top-Down’ cost models. They start with the institution’s budget, divide it across Schools/Departments, and then allocate these costs to the academic programs within those schools. Rarely do these models incorporate the cost of the subjects making up each Program, or take into account the other major products of your institution – research, commercial entities, community support etc. And almost never do they consider subjects taught by one School but used in a degree owned by a different school.

The good news is there is another way – ‘Bottom-Up’ models. These types of models start with the students taught, firstly assigning them to the actual subjects undertaken, then assigning those subjects to the appropriate Academic Program that each student is enrolled in, regardless of school. Direct teaching costs and student fees are assigned to the subjects, and then central or overhead costs are allocated out across the institution using the most appropriate driver metric.

So where to begin? Over the course of four more blog posts (one each week), we will share some of the hints and tips that will help you internally implement a Bottom-Up detailed cost model at your institution.

Tip 1 – Data (what data types and even what data fields!)

Tip 2 – Project Staffing (who is needed and why)

Tip 3 – Model Business Rules and Assumptions (a list of some of most essential ones)

Tip 4 – Timeline (time to build, time to update)

For more information on Academic Program Financial Management please click here.

If you would like to be notified when each new Tip is published, please sign up to our newsletter here: Newsletter | Higher Education Cost Models | Pilbara