CFOS Unit 9

Cost-Effectiveness: Sample Answers - Exercise 9.1

Clearly, the average cost per student is a relatively crude measure. Where an ODL institution offers a range of courses at different levels, the unit costs can vary considerably between them (see Unit 5). Moreover, since those studying at a distance may not have the same work-load as those studying in a conventional institution, it is unfair to use the average cost per student to compare the two modes of delivery (see Unit 8).

Notwithstanding the limitations of the average cost per student measure, it is commonly used to calculate the efficiency of one programme in relation to another, or of one institution in relation to another. The term efficiency ratio is used to refer to the relationship between the average cost per student in one programme, institution or system of education and the average cost per student in another. This measure is commonly used to compare the efficiency of ODL with that of conventional education. However, unless an appropriate calculation is made to establish equivalency between those studying through ODL and full-time students in conventional education, this measure does not compare like with like and is misleading.

Equation for Efficiency Ratio

ER = AC_a ÷ AC_b

Where:

ER = efficiency ratio

AC_a = average cost per FTE student for programme/institution A

AC_b = average cost per FTE student for programme/institution B

• When the efficiency ratio equals 1.00, then both modes are equally efficient.
• When the efficiency ratio is less than 1.00, then ODL is more efficient.
• When the efficiency ratio is greater than 1.00, then ODL is less efficient

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