# Cost and Financing in Open Schooling/Effiency and Effectiveness of ODL/Cost-Effectiveness

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## Cost-Effectiveness

However, we all know from experience that the cheapest product is not always the best. For example, an inexpensive pair of shoes may wear out in only two months, while a pair that costs three times as much will last a year. On the other hand, a programme can be very effective without being efficient. For example, intensive one-to-one tutorials are generally very effective in producing good examination results, but are a very expensive way of doing so. We need another term to express the balance between effectiveness and efficiency.

Cost-effectiveness is that term. Hülsmann defines cost-effectiveness as “. . . the most efficient way to achieve a set goal (2004, page 22).” Essentially, it expresses a balance between attempts to keep costs to a minimum while maximising the outcomes/outputs of an educational institution or programme. The most common measure of cost-effectiveness is the average cost per graduate, which is simply a variant of the Average Costs Equation. In this context, the term ‘graduate’ refers to a student who successfully completes a subject/course/programme rather than someone who holds a qualification from an institution of higher education.

Average Cost per Graduate Equation:

AC g = TC/TNg

Where:

ACg = average cost per graduate
TC = total costs for programme or institution as a whole
TN g = total number of graduates

Activity
 EXERCISE 9.3 Just as with Exercise 9.1, this activity should be carried out with other members of staff in your own institution. You should already know the total expenditure for your institution for the previous financial year, but you will also need to have to hand statistics on the total number of students who passed their examinations or successfully completed courses with your institution for the corresponding period. Using this information and the average cost per graduate equation, calculate the cost-effectiveness of your institution. With your colleagues, brainstorm the limitations of this measure.

Please refer to the following link for Sample Answers - Exercise 9.3

Activity
 Exercise 9.4 Please refer to the common file link to carry out the Exercises: Efficiency and Cost-Effectiveness Ratio/Exercise 9.2 and 9.4

Please refer to the common file Sample Answers for Exercices 9.2 and 9.4 by clicking on the link.

Activity
 EXERCISE 9.5 Open the Hülsmann CD-ROM. Go to 4: Cost-Effectiveness of ODL. Go to Part B: Efficiency & Cost-Effectiveness Ratios. ACTIVITY A13. ACTIVITY A14. Follow the instructions in the MS Excel worksheets.