So far, we have looked at different categories of cost and discussed how these behave in isolation from one another. In terms of budgeting and cost management, though, it is the total expenditure on a course that is of greatest importance.
To start with, however, we will look at a simplified equation wherein semi-variable costs are treated as either fixed or variable.
The basic equation for Total Costs is:
- TC = F + (V × N)
- TC = total costs
- F = fixed costs
- V = variable costs per student
- N = number of students
Variable costs are often estimated on the basis of expenditure per student for materials, labour, equipment, etc. For this reason, it is necessary to multiply the unit cost per student by the number of students to determine the total variable costs. However, if your budget estimates or accounts of actual expenditure show total variable costs, it is not necessary to calculate the unit cost per student. Instead, you can simply add total variable costs with total fixed costs to arrive at the overall total cost for a specific number of students, whether notional or actual.
There are two Key Lessons to learn from this exercise, especially when we compare the costs of ODL with conventional education:
- In terms of their impact on total costs, sooner or later, variable costs are more decisive than fixed costs.
- Even when an ODL course starts with a higher level of fixed costs than conventional education, this does not necessarily mean it is more expensive. If the variable costs for ODL are lower, then sooner or later you will arrive at a point where the total costs for ODL are lower for a given number of students.