Thai 18 June 2002-He..


ABC costing at SHU and costing eLearning

Sarah Heginbotham

18 June 2002



Activity-based costing

The project at SHU

ABC’s relevance to costing e-learning

Funding of HE in the UK


– MASN, Student Fees

– top-sliced then distributed to Schools using UIDM


RESEARCH top-sliced then distributed to research areas relative to their RAE grade


– overhead charged by the University

The Transparency Review

HEFCE Initiative

Cost of research


Report on 5 main activities

Uses ABC terminology

Use of activity time sheets

Phased implementation

Scope of the project

Funded by JISC

Course costing within the School of

Computing and Management Sciences

6 months

Transparency Review

Trial of Activity-based costing

Activity-based costing

Activity-based costing (ABC)

ABC was developed as an alternative costing methodology by Robin Cooper and Robert

Kaplan of the Harvard Business School (1988) in their research into product costing in the manufacturing industry.

Cooper and Kaplan (1988)

They argued that traditional costing distorted product costs (“peanut butter spread approach”)

There is a cost to all activities carried out within an organisation

Activity costs should be distributed to products in relation to their use

The ABC Model





General Ledger




Cost Objects


Activity Drivers

Activities method

Hold Tutorials

Staff time





Cost for each Customer/product/channel group

Business Intelligence

I.T. & Management

I.T. & Management

Cost driver

No. Students

The ABC Process

Decide on the Cost Object

Management Briefings

Create an Activity Dictionary

Allocate General Ledger transactions to activities

Collect and analyse staff time

Allocate the activity costs to cost objects

Advantages of ABC

Gives more than just financial information

Fairer system of overhead allocation

Accountability of central services

Highlights cross-subsidisation

Recognises the changing cost behaviour of different activities as they grow and mature

Can provide data for other initiatives - E.G.

Transparency Review and EFQM.

Disadvantages of ABC

Data collection can be costly and time consuming

Initially it can be difficult to collect the data you want

Determining appropriate and acceptable cost drivers

More complex system

Implementing ABC takes time

“Its important in a service organisation to get started with ABM and not worry about total accuracy from the start. Accuracy will improve with time”

Antos (1992)


ABC v traditional cost allocation in universities

Using traditional methods

Top slicing - central decision making group decide on allocations to schools

Charge back - allocated to Schools using simple cost driver

Using activity-based costing

Allocates costs to Schools on their actual usage

How we differ from manufacturing


In manufacturing industry the central finance department require and analyse the costs of production and the makeup of the the organisations’ product portfolio. Its pricing policy is directly influenced by this information.


Very rare to find a finance director examining costs on a course-by-course basis. Product information is held in the School and product decisions are not based primarily on cost.

ABC use in the UK HE sector

(source Cropper and Cook, 2000)









1993 1998

Discussion not taken place

Decided not to introduce

Consideration being given

Intend to introduce

ABC been introduced

The Project at Sheffield Hallam


What we set out to do

Familiarise ourselves with activity-based costing

Literature Review

Review available software providers and choose an experienced partner for the project

Decide upon and collect the relevant data

Analyse the data

Provide useful information to the School involved

Report back to JISC and disseminate

Course costing handbook

Choosing a partner -

Armstrong Laing

Experienced in both public and private sector

AL Consultants are recruited from successful implementations

User friendly software

Willing to enter into a true partnership

No previous ABC implementation in HE

Problems we faced


– Limited time

Academic workload

Fuel crisis and rail problems

Industrial action

Initiative Overload

Bottom-up approach

Staff Resistance

– Reluctance to fill out the Activity Dictionary

– Fear of what we might discover

Following the ABC process....

Decide on the Cost Object

Management Briefings

Create an Activity Dictionary

Allocate General Ledger transactions to activities

Collect and analyse staff time ?

Allocate the activity costs to cost objects


Collecting Staff Time at Heriot-Watt

Annual retrospective questionnaire (inaccurate)

Diary sampling

– 2 weeks at random from a 12 week sampling period half hour slots 7/24

Anonymous (pin numbers)

Accurate but time consuming and costly

In year retrospective questionnaire

– 6 times per year

– 10 categories that can be easily consolidated to 5 for the

Transparency Review

Lessons learnt at Heriot-Watt


What to do about non-returners

Cannot give staff too much information

How we had to adapt

Shorter sessions for workshops

Activity Dictionaries filled out by individuals

Longer time scales for return of information

What we would do differently next time

Ensure we have full top management support


Alter the cost code structure and ensure it is consistent

Longer implementation stage

Type of information we found

PG make up 5% of student numbers but

11% of overall student costs.

UG make up

75% of student numbers but only 68% of overall student costs.

Teaching Activity Costs










TEA04 - Prepare teaching materials

TEA05 - Prepare and distribute course guides to students

TEA06 - Publish/photocopy teaching materials

TEA07 - Undertake timetabled teaching including tutorials

TEA08 - Undertake non-timetabled teaching including project supervision

TEA09 - Conduct formative assessment (check student progress)

TEA10 - Update subject knowledge

TEA11 - Prepare distance learning material - type/format

TEA12 - Issue distance learning material worldwide

So where next?

Gain funding for the next phase of the project

Develop a comprehensive list of activities that are involved in e-learning

Re-run the exercise in an institution(s) where e-learning takes place

The activities for eLearning

The activities you choose/use will depend on what you are doing and why

– revision students cant make scheduled classes to encourage collaboration etc...

remote students (place) students working at different places/different levels of ability run out of frogs to disect so you want to show it being done over the internet

Accepted that there is always a need for some f2f

‘blended learning’

Course Lifecycle Model

Planning and


Three-phase model of course development

Maintenance and Evaluation

Production and


The activities

Planning and


Production and


Evaluation and


collecting materials

coming up with the idea

writing user guides or course publicity

curriculum delivery

duplication of materials

tutorial guidance

quality assurance exercises

replacement and updating of materials

evaluation against course aims

Delivery Media & Technologies:

Print :

 Textbooks, Study Guides, Workbooks - Are still very common in online learning courses.

Audio :

Streaming audio - Used to deliver the instructors comments over any network.

Audio tapes - Could be mailed to students.

Video :

Streaming video - Can deliver video over any network.

Videotape - Could be produced and mailed to students.

Cable TV - Course segments can be produced and aired in various locations nationwide



Web Pages - A very common form of delivering content.

CBT Content - Often delivered via CD-ROM, but also deliverable via a network.

Computer files - Can be emailed or downloaded from a server (word processor, spreadsheet, presentation, database, etc.).

Online Tests - Computer scripts can be written to deliver a variety of test formats.

Interactive Tools

Asynchronous :

Email - Used for questions and discussion.

Listservs - Basically email to everyone in the class or section at once.

Web Forums - Also called discussion forums or bulletin boards. They are probably the most common form of interaction in online courses.

Newsgroups - Public forums that use the Usenet system.

BBS - A computer bulletin board that you dial, and use like a web forum + email + file transfer.

Synchronous :

Chat Rooms - Can be either moderated by an instructor of un-moderated for class use.

Shared Whiteboards

Application Sharing collaboration.

- Allow class members to write on the same digital whiteboard.

- The same program and file can be shared for demonstration or

Teleconferencing - Could be used to deliver instructor audio, or for collaboration.

Videoconferencing - Either from expensive, high quality, dedicated systems, or from less reliable desktop versions.



Virtual worlds where users take on avatars and interact in various ways.

Costs of eLearning

Initial set-up costs

Key recurrent costs

Time spent on activities

Key initial set up (capital) costs:

(see Claeys, 2001)

Development costs

Development of Technologies used to teach

Content development


Software,including learning management platforms

Infrastructure for networking

Material costs

(disks, papers, telephones, wires and other materials for keeping the technology programme going)

Accommodation - including Physical space

Key recurrent costs

(see Claeys, 2001)


student/learner support, teacher support, helpdesk, operations support, computer laboratory support

Technical support of the system,

including maintenance and upgrading costs (of soft- and hardware)

Content development

(with input from faculty, instructional designers, creative personnel)

Faculty development training

Personnel and management costs:

administration and management labour and outsourcing fees, network management, technicians, programmers, multimedia developers,

Communication costs

(bandwidth and server access charges)

Use of learning platform:

leasing fees (per account, per number of learners or per server), maintenance and upgrading costs

Opportunity costs:

computer downtime, costs of unused capacity

(space, physical assets)

Initial findings of TCM

(Johnstone and Russell, 2002)

People costs outweigh technology costs

Dont forget the student support services

Scalability and course development are the two primary cost determinants

Scalability can keep costs down

Sharing course development costs saves money

At last.....actual figures!!!

“Course conversion costs are about $25,000 and up for a two-hour course, depending on the kind of interaction needed.”

Schooley (2001)

“...we can say with some level of certainty that it can take on average about 18 hours of faculty time-to create an hour of instruction that is on the web”.


Media Hours of academic effort

(taken from Boettcher, 1999)

Lecturing 2 -10

Small group teaching 1-10

Videotaped lectures 3-10

Web development 5 - 23

Teaching Text (book) 50 -100*

Broadcast television 100*

Computer-aided Learning 200*

Interactive video 300*

* require support staff as well

Comparison of production costs

( where an hour of traditional face-to-face teaching is counted as 1 unit)

Audio cassette/radio/teleconference

'Talking heads' video or televised lectures

2 units

2-5 units

Computer networked mediated communication 2-5 units

Printed material

High quality video or TV programmes

2-10 units

20-50 units

Pre-programmed computer-based training


20-50 units

50-100 units

European Commission (IRDAC 1994),

Useful Web sites and articles

 ost_analysis_intro (Claeys, 2001)

 (Boettcher, 1999)

 (Schooley,



Johnsstone Sally.M and Poulin Russell (2002) So, How Much Do

Educational Technologies Really Cost? Change. March/April 2002

Hunt,M. and Clarke,A. (1977) A Guide to Cost Effectiveness of

Technology-Based Training, Coventry, NCET

Details about the project can be found at

Thank you for listening