Cost and Financing in Open Schooling/Unit Costs: Determining costs per student, per course or per programme

Introduction
The ability to calculate costs for a unit or measured amount of a product or service is important in many aspects of budgeting and cost management. In the open and distance learning sub-sector, unit costing is necessary for the following tasks:


 * to determine appropriate fee levels (where cost recovery models are used);
 * to compare costs of alternative ways of delivering a particular course;
 * to carry out an Activity-Based Cost analysis; and
 * to compare costs of an ODL institution with those for conventional education.

Some activities, such as marking of assignments by contract tutor-markers, are typically undertaken and paid for on a piece-work basis. Under such circumstances, it is easy to identify the direct cost of each unit, as a fixed fee is paid for each assignment marked. The problem is that other costs associated with this activity are not included in the calculation. For example, the work done by a tutor-marker is only part of a chain of activities, including: The full cost of each marked assignment – the measured unit of the service provided by the institution – should include the expenditure incurred for all of these related activities.
 * recruiting and training tutor-markers,
 * maintaining records of assignments received from students,
 * bundling these assignments for collection by tutor-markers,
 * maintaining records of marked assignments received from tutor-markers,
 * recording marks on the student's file or in a computerised database,
 * returning marked assignments to students
 * handling claims from tutor-markers and issuing payments.

A second problem can also arise when defining the unit to be measured. For example, when we use the word ‘student’, what do we mean by this term? Are we referring to individuals registered with our ODL institution, to the number of enrolments for a particular subject or module, or to the number who successfully complete the course? Where a particular course or programme lasts more than one year, the issue becomes even less straightforward. For this reason, we need to make very clear exactly what units and what costs we are referring to in any discussion of unit costs.

Various ways of establishing equivalency between ODL students and those in conventional education are discussed in Unit 8. This unit looks at two basic approaches to unit costs.