CONCEPTS AND DETERMINANTS OF EDUCATION COSTS

Feljone G. Ragma

Why is it necessary to determine education costs?

This contributes much to decision-making, planning and monitoring in education.

A school head/ manager can adjust financial resources or requirementshe can minimize costs and improve profit.

What are the Components of Education Costs?

The Components of Education Costs:1. Direct and Indirect2. Private and Social3. Current and Capital4. Fixed and Variable

Direct and Indirect Costs

• Direct Costs are costs that can be identified solely for the use in the production process of a particular product. I.E. salary of teachers, personnel, books

• Indirect Costs are costs that are used in the production of several products, such that one has to apply a certain ratio to apportion such costs. I.E. water, light

Private and Social Costs

• Private Costs are payments made by parents for tuition fees, registration and matriculation, other school fees, uniforms and transport services. These are costs incurred by parents.

• Social Costs are costs incurred by society and the government due to the provision of educational services. The hiring of additional traffic enforcers, traffic lights and the like because of the presence of students in a community.

Current and Capital Costs

• Capital Costs are those which have some material impact of prolonging the life of assets and capitalized and form part of the capital expenditures. I.E> assets with life of more than 1 year such as buildings, books, equipments

• Current Costs are those costs incurred in the depreciation of value of assets procured. Such is considered depreciation, and considered expense of the year.

Fixed and Variable Costs

• Fixed Costs are costs which do not increase with an increase in the number of students. These are administrative costs such as the salary of the dean, president, payments for loans and their interests

• Variable Costs are dependent on the number of students such as teachers’ salary, classroom, supplies.

Since expenditures and profit rely on students’ enrollment, especially

in the private schools, what mechanism can be done to

monitor and lessen deficits?

Departmental Accounting and Sharing of Deficits are very good

mechanisms.

Concept of Break-even point

• In economics & business, specifically cost accounting, the break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return

How to compute for the BEP?

• Boardwork