Activity Based Costing Project
2003 - 2005
Executive Summary
USQ Student Enrolments 2004
USQ Delivery Channels
Individual
Off Campus
Channel
Distributed
Learning Centre
Channel
On Campus
Channel
Individual
Distributed
Learning Centres
On Campus
Standard
DE
Primarily
Online
Wide Bay
Toowoomba
Springfield
Off Shore
On Shore
50%
4%
3%
23%
0%
17%
3%
The Economic Denominator
The Activity Based Costing Project sought to address the question:
“What drives USQ’s Economic Engine?”
“The Hedgehog Concept” – Collins, 2001.
What are you
deeply passionate
about?
What you can
be the best in
the world at?
What drives
your
economic
engine?
What is the economic denominator (profit per x or, in the social sector, cash
flow per x) which has the single greatest impact on moving the organisation
“From Good to Great”?
Methodology
ABC attempts to link the inputs of the University (people, premises, technology and consumables) with the outputs
teaching courses and programs and research. A typical cost architecture and model data sources are shown below.
RESOURCES
ACTIVITIES
Faculties
Payroll
System
Academic
Support
Administration
Support
Time
Surveys
COST OBJECTS
Delivery Modes
Preparing
Lectures Timetabling Courses
Preparing
Lectures
System
PreparingLectures
Lectures
Preparing
ACC 1100
Preparing Lectures
Delivering Lectures
DeliveringLectures
Lectures
Delivering
SCC1123
Delivering
Lectures
Delivering Lectures
AssessingStudents
Students Student
Assessing
Students
Assessing
Students
Assessing Students
Records
Assessing Students
International
System
Onshore
Liaising with
Students
Supporting
Student
Marketing
Research Support
Floorspace /
Timetabling
Systems
Facilities
Financial
Systems
Domestic
HECS
Researching
Enrolling Students
Library
Finance, IT, HR
International
Offshore
Providing Library
Services
Providing Corporate
Services
Domestic
Fee Paying
Research
Grants
Business
Sustaining
Publications
Leadership Strategy
HRD Completions
Govern Compliance
Programs
B. Bus
B. Sc
B. Arts
M. Bus
M. Sc
M. IB
Model Demonstration
Resource Costs are assigned to Activities based on statistical drivers. The cost of Academic Salaries,
for example, is assigned to activities based on Salary Weighted Time Survey results as shown below.
2003 Results: Course Contribution Cliff
The USQ cumulative “Course Contribution Cliff” is shown below. The courses on the left are
the most profitable with the courses on the right being the least profitable.
30
25
$10M in value
is eroded by
200 courses
20
$M 15
10
5
0
537 Courses
528 Courses
2003 Results by Faculty
The contribution from teaching from each of the Faculties is shown below. The size of the
bubble represents the number of enrolments. Faculties below the x-axis are providing a
negative contribution.
8
Contribution Margin = 15%
Contribution ($M)
6
Faculty of Arts
Faculty of Business
4
Faculty of Education
Faculty of Engineering and
Surveying
Faculty of Sciences
2
0
0
10
20
30
40
Key:
-2
Revenue ($M)
2,000
Enrolments
20,000
Enrolments
2003 Results by Delivery Mode
The contribution from teaching from each of the modes is shown below. The size of the Bubble
represents the number of enrolments. Modes below the x-axis are providing a negative
contribution.
12
Contribution ($M)
8
Contribution Margin = 15%
4
0
(20)
0
20
40
60
Educational Partners - Off Shore
Educational Partners - On Shore
Off Campus - On-Line
Off Campus - Standard
On Campus - Toowoomba
On Campus - Wide Bay
-4
Key:
-8
Revenue ($M)
2,000
Enrolments
20,000
Enrolments
2003 Results by Educational Partner
Educational partner results are shown below. The size of the bubble represents the number of
enrolments. Partners below the x-axis are providing a negative contribution.
Target Contribution Margin - 15%
20%
400
10%
300
Contribution ($000)
200
100
0
(500)
Break Even
0
500
1,000
1,500
2,000
2,500
3,000
(100)
Bretten
Canterbury
Informatics - Malaysia
Informatics - Singapore
Kangda College
SALO
Segi Group
STI - Shanghai
STI - Taiwan
ZUCC
Other
(200)
45
Partners
(300)
(10%)
Key:
(400)
(500)
(40%)
Revenue ($000)
(30%)
(20%)
250
Enrolments
2000
Enrolments
Note: Construction of this level of detail from the ABC Model
result requires further analysis outside of the model.
Performance Management
The Economic
Denominator
For USQ the economic denominator is the
“Course Contribution Margin”
Department
Contribution
Course contribution targets will be set for each
Faculty/ Department
Course
Level
Management
A framework is being developed to address possible
course /program rationalization
Performance Management (cont’d)
Educational
Partners
USQ has changed its Learning Management System
for online delivery and is now investigating an open
source/open standards based approach
An Educational Partner Model is being developed
addressing such issues as:
• Pricing model;
• Standard Contract; and
• “Partner non-performance” escape clauses
The Economic Denominator
The University is in the process of setting targets for all output groups (Teaching, Research,
Commercial, Community, etc).
University Example
Total Revenue
$130M
Revenue from Teaching
$110M
Return @ 5% = Net Profit
Add: Investment in Research
Add: Strategic Projects
Required Contribution From Teaching
$6M
$10M
$8M
$24M
Baseline Teaching Margin = 22%
(24/110  100)
Course contribution is the Economic Denominator. Well
structured programs with a reasonable sized student cohort
deliver a 30% - 40% Contribution Margin
The Economic Denominator
With course contribution as the economic denominator, USQ is committed to reducing the
number of courses which provide a negative contribution, thus “Trimming the Tail off the
Whale”.
30
25
20
$M 15
10
5
0
537 Courses
528 Courses
Model Utilisation and Enhancement
•The Activity Based Costing Model is a journey, not a
destination
•Current enhancements include: Calculating program
contribution; Deployment of model reporting and
analysis; Data collection of time surveys online
•Data is to be refreshed annually
•The use of the ABC Model for budgetary allocation
purposes is via the Budget Management Committee,
which is chaired by the VC