Cost and Financing in Open Schooling/ How Student Numbers Affect Costs/Average Costs

The exercise in the previous section highlights the importance of average costs in the economics of ODL. It is important to calculate average costs over the lifetime of a course rather than on a year-by-year basis. This is because some costs, such as those for developing materials, are only incurred once even though the course may run for a number of years without revision. The total costs over the economic life of the course need to be divided by the total number of students expected to enrol for the course during the same period.

The Average Costs equation is as follows:
 * ACs = TC/TNs

Where:
 * ACs 	= 	average cost per student
 * TC 	= 	total costs
 * TNs	= 	total number of students

The average cost per student behaves in a different way from the total cost of a course. Whereas the total cost of a course continues to rise as student numbers increase, the average cost per student actually falls. This is because the fixed costs of the course can be spread amongst a greater number of students, even though the variable cost per student remains unchanged.

Source: Adapted from Rumble, 1997, Figure 5.2, page 37.

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