ABC costing at SHU and ABC costing at SHU and costing eLearningcosting eLearning

Sarah Heginbotham

18 June 2002

TodayToday BackgroundBackground Activity-based costingActivity-based costing The project at SHUThe project at SHU ABC’s relevance to costing e-learningABC’s relevance to costing e-learning

Funding of HE in the UKFunding of HE in the UK TEACHINGTEACHING

– MASN, Student Fees MASN, Student Fees – top-sliced then distributed to Schools using top-sliced then distributed to Schools using

UIDMUIDM RESEARCHRESEARCH

– RESEARCHRESEARCH– top-sliced then distributed to research areas top-sliced then distributed to research areas

relative to their RAE graderelative to their RAE grade PRIVATEPRIVATE

– overhead charged by the University overhead charged by the University

The Transparency ReviewThe Transparency Review

HEFCE InitiativeHEFCE Initiative

Cost of researchCost of research

CompulsoryCompulsory

Report on 5 main activitiesReport on 5 main activities

Uses ABC terminologyUses ABC terminology

Use of activity time sheetsUse of activity time sheets

Phased implementationPhased implementation

Scope of the projectScope of the project

Funded by JISCFunded by JISC

Course costing within the School of Course costing within the School of

Computing and Management SciencesComputing and Management Sciences

6 months6 months

Transparency ReviewTransparency Review Trial of Activity-based costingTrial of Activity-based costing

Activity-based costingActivity-based costing

Activity-based costing (ABC)Activity-based costing (ABC)

ABC was developed as an alternative ABC was developed as an alternative costing methodology by Robin Cooper costing methodology by Robin Cooper and Robert Kaplan of the Harvard and Robert Kaplan of the Harvard Business School (1988) in their research Business School (1988) in their research into product costing in the into product costing in the manufacturing industry. manufacturing industry.

Cooper and Kaplan Cooper and Kaplan (1988)(1988)

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

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

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

The ABC ModelThe ABC Model

General Ledger

Activities

Cost Objects

BudgetsBusiness Sustaining Costs

Methods

Cost Drivers

Activity DriversActivity Drivers

Hold Tutorials

No. Students

Business Intelligence

Resources

Cost for each Customer/product/channel group

method Activities

Staff time

Cost driver

I.T. & Management

I.T. & Management

FT

FT

DL

Decide on the Cost ObjectDecide on the Cost Object

Management BriefingsManagement Briefings

Create an Activity DictionaryCreate an Activity Dictionary Allocate General Ledger transactions to Allocate General Ledger transactions to

activitiesactivities

Collect and analyse staff timeCollect and analyse staff time

Allocate the activity costs to cost objects Allocate the activity costs to cost objects

The ABC ProcessThe ABC Process

Advantages of ABCAdvantages of ABC

Gives more than just financial informationGives more than just financial information Fairer system of overhead allocationFairer system of overhead allocation Accountability of central servicesAccountability of central services Highlights cross-subsidisationHighlights cross-subsidisation Recognises the changing cost behaviour Recognises the changing cost behaviour

of different activities as they grow and of different activities as they grow and maturemature

Can provide data for other initiatives - Can provide data for other initiatives - E.G. Transparency Review and EFQM.E.G. Transparency Review and EFQM.

Disadvantages of ABCDisadvantages of ABC Data collection can be costly and time Data collection can be costly and time

consumingconsuming

Initially it can be difficult to collect the data Initially it can be difficult to collect the data you wantyou want

Determining appropriate and acceptable Determining appropriate and acceptable cost driverscost drivers

More complex system More complex system

Implementing ABC takes Implementing ABC takes timetime

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

Antos (1992)Antos (1992)

ABC in HEABC in HE

ABC v traditional cost ABC v traditional cost allocation in universitiesallocation in universities

Using traditional methods Using traditional methods Top slicing - central decision making Top slicing - central decision making

group decide on allocations to schoolsgroup decide on allocations to schools Charge back - allocated to Schools using Charge back - allocated to Schools using

simple cost driver simple cost driver

Using activity-based costingUsing activity-based costing Allocates costs to Schools on their actual Allocates costs to Schools on their actual

usageusage

How we differ from How we differ from manufacturingmanufacturing

ManufacturingManufacturing

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

UniversityUniversity

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

ABC use in the UK HE ABC use in the UK HE sector sector (source Cropper and Cook, 2000)(source Cropper and Cook, 2000)

0

10

20

30

40

50

60

70

1993 1998

Discussion not taken place

Decided not to introduce

Consideration being given

Intend to introduce

ABC been introduced

The Project at Sheffield The Project at Sheffield Hallam UniversityHallam University

What we set out to doWhat we set out to do

Familiarise ourselves with activity-based Familiarise ourselves with activity-based costingcosting

Literature ReviewLiterature Review Review available software providers and Review available software providers and

choose an experienced partner for the projectchoose an experienced partner for the project Decide upon and collect the relevant dataDecide upon and collect the relevant data Analyse the dataAnalyse the data Provide useful information to the School Provide useful information to the School

involvedinvolved Report back to JISC and disseminateReport back to JISC and disseminate Course costing handbookCourse costing handbook

Choosing a partner - Choosing a partner - Armstrong LaingArmstrong Laing

Experienced in both public and private Experienced in both public and private sectorsector

AL Consultants are recruited from AL Consultants are recruited from

successful implementations successful implementations

User friendly softwareUser friendly software

Willing to enter into a true partnershipWilling to enter into a true partnership

No previous ABC implementation in HENo previous ABC implementation in HE

Problems we facedProblems we faced

TimingTiming– Limited timeLimited time– Academic workloadAcademic workload– Fuel crisis and rail problemsFuel crisis and rail problems– Industrial actionIndustrial action

Initiative OverloadInitiative Overload Bottom-up approachBottom-up approach Staff ResistanceStaff Resistance

– Reluctance to fill out the Activity DictionaryReluctance to fill out the Activity Dictionary– Fear of what we might discoverFear of what we might discover

Following the ABC Following the ABC process....process....

Decide on the Cost Object Decide on the Cost Object

Management Briefings Management Briefings

Create an Activity Dictionary Create an Activity Dictionary Allocate General Ledger transactions to Allocate General Ledger transactions to

activities activities

Collect and analyse staff time ?Collect and analyse staff time ?

Allocate the activity costs to cost objects Allocate the activity costs to cost objects

Collecting Staff Time at Heriot-Collecting Staff Time at Heriot-WattWatt

Annual retrospective questionnaire Annual retrospective questionnaire (inaccurate)(inaccurate)

Diary sampling Diary sampling – 2 weeks at random from a 12 week sampling 2 weeks at random from a 12 week sampling

period period – half hour slots 7/24half hour slots 7/24– Anonymous (pin numbers)Anonymous (pin numbers)– Accurate but time consuming and costlyAccurate but time consuming and costly

In year retrospective questionnaireIn year retrospective questionnaire– 6 times per year6 times per year– 10 categories that can be easily consolidated to 5 10 categories that can be easily consolidated to 5

for the Transparency Reviewfor the Transparency Review

Lessons learnt at Heriot-Lessons learnt at Heriot-WattWatt

Anonymity Anonymity

What to do about non-returnersWhat to do about non-returners

Cannot give staff too much informationCannot give staff too much information

How we had to adapt How we had to adapt

Shorter sessions for workshopsShorter sessions for workshops

Activity Dictionaries filled out by Activity Dictionaries filled out by individualsindividuals

Longer time scales for return of Longer time scales for return of informationinformation

What we would do differently What we would do differently next timenext time

Ensure we have full top management Ensure we have full top management

supportsupport

LanguageLanguage

Alter the cost code structure and ensure Alter the cost code structure and ensure

it is consistentit is consistent

Longer implementation stageLonger implementation stage

Type of information we Type of information we foundfound

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

4% 6%2%

65%

3%11%

1%1%

7%

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?So where next? Gain funding for the next phase of the Gain funding for the next phase of the

projectproject Develop a comprehensive list of Develop a comprehensive list of

activities that are involved in e-learningactivities that are involved in e-learning Re-run the exercise in an institution(s) Re-run the exercise in an institution(s)

where e-learning takes placewhere e-learning takes place

The activities for eLearningThe activities for eLearning

The activities you choose/use will depend on The activities you choose/use will depend on what you are doing and whywhat you are doing and why– revisionrevision– students cant make scheduled classesstudents cant make scheduled classes– to encourage collaboration etc...to encourage collaboration etc...– remote students (place)remote students (place)– students working at different places/different levels of students working at different places/different levels of

abilityability– run out of frogs to disect so you want to show it being done run out of frogs to disect so you want to show it being done

over the internetover the internet

Accepted that there is always a need for Accepted that there is always a need for some f2fsome f2f

‘‘blended learning’blended learning’

Course Lifecycle ModelCourse Lifecycle Model

Planning and Development

Production and Delivery

Maintenance and Evaluation

Three-phase model of course development

The activitiesThe activities

Planning andDevelopment

collecting materials coming up with the idea writing user guides or course

publicity

Production andDelivery

curriculum delivery duplication of materials tutorial guidance

Evaluation andMaintenance

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 Streaming audio - Used to deliver the instructors comments over any network. Audio tapes - Could be mailed to students.

Video : Streaming videoStreaming 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 PagesWeb Pages - A very common form of delivering content. CBT Content CBT Content - Often delivered via CD-ROM, but also deliverable via a network. Computer files 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 -

Interactive ToolsInteractive Tools

Asynchronous : EmailEmail - Used for questions and discussion. ListservsListservs - Basically email to everyone in the class or section at once. Web ForumsWeb Forums - Also called discussion forums or bulletin boards. They are probably the

most common form of interaction in online courses. NewsgroupsNewsgroups - Public forums that use the Usenet system. BBSBBS - A computer bulletin board that you dial, and use like a web forum + email + file

transfer. Synchronous :

Chat Rooms Chat Rooms - Can be either moderated by an instructor of un-moderated for class use. Shared WhiteboardsShared Whiteboards - Allow class members to write on the same digital whiteboard. Application SharingApplication Sharing - The same program and file can be shared for demonstration or

collaboration. TeleconferencingTeleconferencing - Could be used to deliver instructor audio, or for collaboration. VideoconferencingVideoconferencing - Either from expensive, high quality, dedicated systems, or from less

reliable desktop versions.

MOOs & MUDsMOOs & MUDs - Virtual worlds where users take on avatars and interact in various ways.

Costs of eLearningCosts of eLearning Initial set-up costsInitial set-up costs Key recurrent costsKey recurrent costs Time spent on activitiesTime spent on activities

Key initial set up (capital) costs: (see Claeys, 2001)(see Claeys, 2001)

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

Key recurrent costs Key recurrent costs (see Claeys, (see Claeys,

2001)2001)

– Support: 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 TCMInitial findings of TCM(Johnstone and Russell, 2002)(Johnstone and Russell, 2002)

People costs outweigh technology costsPeople costs outweigh technology costs Dont forget the student support servicesDont forget the student support services Scalability and course development are Scalability and course development are

the two primary cost determinantsthe two primary cost determinants Scalability can keep costs downScalability can keep costs down Sharing course development costs Sharing course development costs

saves moneysaves money

At last.....actual figures!!!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”. Boettcher,1999

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 2 units 'Talking heads' video or televised lectures 2-5 units Computer networked mediated communication 2-5 units Printed material 2-10 units High quality video or TV programmes 20-50 units Pre-programmed computer-based training 20-50 units Multimedia 50-100 units

European Commission (IRDAC 1994),

Useful Web sites and Useful Web sites and articlesarticles

http://www.nineveh.polito.it/Nineveh/thematic_analysis/?

display_page=cost_analysis_intro (Claeys, 2001)

http://www.westga.edu/~distance/mcfadden24.html

http://www.cren.net/~jboettch/dlmay.htm (Boettcher, 1999)

http://www.ciol.com/content/news/trends/101102301.asp (Schooley,

2001)

http://www.learningcircuits.org/feb2000/feb2000_elearn.html

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

Details about the project can be Details about the project can be

found at -found at -

http://www.shu.ac.uk/cnlhttp://www.shu.ac.uk/cnlThank you for listening