Sarah Heginbotham
18 June 2002

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Background
Activity-based costing
The project at SHU
ABC’s relevance to costing e-learning

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TEACHING
– MASN, Student Fees
– top-sliced then distributed to Schools using UIDM
RESEARCH
– RESEARCH
– top-sliced then distributed to research areas relative to their RAE grade
PRIVATE
– overhead charged by the University

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HEFCE Initiative
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Cost of research
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Compulsory
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Report on 5 main activities
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Uses ABC terminology
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Use of activity time sheets
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Phased implementation

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Funded by JISC
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Course costing within the School of
Computing and Management Sciences
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6 months
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Transparency Review
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Trial of Activity-based costing

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.

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They argued that traditional costing distorted product costs (“peanut butter spread approach”)
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There is a cost to all activities carried out within an organisation
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Activity costs should be distributed to products in relation to their use

Business
Sustaining
Costs
Methods
General Ledger
Activities
Cost
Drivers
Cost Objects
Budgets

Activities method
Hold Tutorials
Staff time
Resources
FT
FT
DL
Cost for each Customer/product/channel group
Business Intelligence
I.T. & Management
I.T. & Management
Cost driver
No. Students

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Decide on the Cost Object
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Management Briefings
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Create an Activity Dictionary
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Allocate General Ledger transactions to activities
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Collect and analyse staff time
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Allocate the activity costs to cost objects

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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.

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Data collection can be costly and time consuming
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Initially it can be difficult to collect the data you want
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Determining appropriate and acceptable cost drivers
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More complex system

“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)

Using traditional methods
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Top slicing - central decision making group decide on allocations to schools
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Charge back - allocated to Schools using simple cost driver
Using activity-based costing
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Allocates costs to Schools on their actual usage

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.
University
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.

(source Cropper and Cook, 2000)
30
20
10
0
70
60
50
40
1993 1998
Discussion not taken place
Decided not to introduce
Consideration being given
Intend to introduce
ABC been introduced

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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

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Experienced in both public and private sector
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AL Consultants are recruited from successful implementations
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User friendly software
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Willing to enter into a true partnership
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No previous ABC implementation in HE

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Timing
– 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

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Decide on the Cost Object 
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Management Briefings 
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Create an Activity Dictionary 
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Allocate General Ledger transactions to activities 
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Collect and analyse staff time ?
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Allocate the activity costs to cost objects 

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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

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Anonymity
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What to do about non-returners
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Cannot give staff too much information

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Shorter sessions for workshops
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Activity Dictionaries filled out by individuals
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Longer time scales for return of information

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Ensure we have full top management support
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Language
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Alter the cost code structure and ensure it is consistent
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Longer implementation stage

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
1% 1% 4%
3%
11% 6%
2%
7%
65%
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

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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

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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’

Planning and
Development
Three-phase model of course development
Maintenance and Evaluation
Production and
Delivery

Planning and
Development
Production and
Delivery
Evaluation and
Maintenance
 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

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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 .
Data:
 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.

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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.
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Synchronous :
 Chat Rooms - Can be either moderated by an instructor of un-moderated for class use.
 Shared Whiteboards - Allow class members to write on the same digital whiteboard.
 Application Sharing - The same program and file can be shared for demonstration or collaboration.
 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.
 MOOs & MUDs Virtual worlds where users take on avatars and interact in various ways.

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Initial set-up costs
Key recurrent costs
Time spent on activities

(see Claeys, 2001)
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Development costs
– Development of Technologies used to teach
– Content development
Hardware
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

(see Claeys, 2001)
– Support: student/learner support, teacher support, helpdesk, operations support, computer laboratory support
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Technical support of the system, including maintenance and upgrading costs (of soft- and hardware)
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Content development (with input from faculty, instructional designers, creative personnel)
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Faculty development training
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Personnel and management costs: administration and management labour and outsourcing fees, network management, technicians, programmers, multimedia developers,
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Communication costs (bandwidth and server access charges)
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Use of learning platform: leasing fees (per account, per number of learners or per server), maintenance and upgrading costs
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Opportunity costs: computer downtime, costs of unused capacity
(space, physical assets)

(Johnstone and Russell, 2002)
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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

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“Course conversion costs are about $25,000 and up for a two-hour course, depending on the kind of interaction needed.”
Schooley (2001)
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“...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”.
Boettcher,1999

(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

( where an hour of traditional face-to-face teaching is counted as 1 unit)
 Audio cassette/radio/teleconference 2 units
 'Talking heads' video or televised lectures 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
 Multimedia 50-100 units
European Commission (IRDAC 1994),

 http://www.nineveh.polito.it/Nineveh/thematic_analysis/?display_page=c ost_analysis_intro (Claeys, 2001)
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 http://www.westga.edu/~distance/mcfadden24.html http://www.cren.net/~jboettch/dlmay.htm (Boettcher, 1999)
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 http://www.ciol.com/content/news/trends/101102301.asp (Schooley,
2001) http://www.learningcircuits.org/feb2000/feb2000_elearn.html
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 http://www.learningcircuits.org/2002/feb2002/moran.html
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

Thank you for listening