Activity Based Costing ProjectActivity Based Costing Project 2003 - 2005 2003 - 2005
Executive SummaryExecutive Summary
USQ Student Enrolments 2004USQ Delivery Channels
On CampusIndividual Distributed Learning Centres
Standard DE Off ShorePrimarily
Online On ShoreWide Bay SpringfieldToowoomba
IndividualOff Campus
Channel
On CampusChannel
Distributed Learning Centre
Channel
50% 4% 3% 23% 0% 17% 3%
The Economic DenominatorThe Activity Based Costing Project sought to address the question:
“What drives USQ’s Economic Engine?”
What are you deeply passionate
about?
What you can be the best in the world at?
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”?
What drives your
economic engine?
“The Hedgehog Concept” – Collins, 2001.
MethodologyABC 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.
Faculties
RESOURCES ACTIVITIES COST OBJECTS
AcademicSupport
AdministrationSupport
Marketing
Research Support
SupportingStudent
Researching
Enrolling Students
Providing LibraryServices
ACC 1100
SCC1123
Courses
B. Bus
B. Sc
B. Arts
M. Bus
M. Sc
M. IB
Programs
Research
InternationalOnshore
InternationalOffshore
DomesticHECS
DomesticFee Paying
Students
Library
Finance, IT, HR
Providing CorporateServices
Liaising with Students
TimeSurveys
Floorspace / Timetabling
Systems
Grants
Publications
HRD Completions
BusinessSustaining
Leadership
Govern
Strategy
Compliance
FinancialSystems
PayrollSystem
Facilities
Preparing Lectures
Delivering Lectures
Assessing Students
Preparing Lectures
Delivering Lectures
Assessing Students
Preparing Lectures
Delivering Lectures
Assessing Students
Preparing Lectures
Delivering Lectures
Assessing Students
Preparing Lectures
Delivering Lectures
Assessing Students
StudentRecordsSystem
TimetablingSystem
Delivery Modes
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.
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.
0
5
10
15
20
25
30
$M
537 Courses 528 Courses
$10M in value is eroded by 200 courses
2003 Results: Course Contribution Cliff
The contribution from teaching from each of the Faculties is shown below. The size of the bubble represents the number of enrolments. Faculties below the x-axis are providing a negative contribution.
2003 Results by Faculty
Key:
2,000 20,000Enrolments Enrolments
-2
0
2
4
6
8
0 10 20 30 40
Revenue ($M)
Con
trib
utio
n ($
M) Faculty of Arts
Faculty of Business
Faculty of Education
Faculty of Engineering andSurveyingFaculty of Sciences
Contribution Margin = 15%
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.
2003 Results by Delivery Mode
Key:
2,000 20,000Enrolments Enrolments
-8
-4
0
4
8
12
(20) 0 20 40 60
Revenue ($M)
Con
trib
utio
n ($
M)
Educational Partners - Off ShoreEducational Partners - On ShoreOff Campus - On-LineOff Campus - StandardOn Campus - ToowoombaOn Campus - Wide Bay
Contribution Margin = 15%
(500)
(400)
(300)
(200)
(100)
0
100
200
300
400
(500) 0 500 1,000 1,500 2,000 2,500 3,000
BrettenCanterburyInformatics - MalaysiaInformatics - SingaporeKangda CollegeSALOSegi GroupSTI - ShanghaiSTI - TaiwanZUCCOther
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.
Revenue ($000)
Con
trib
utio
n ($
000)
20%
10%
(10%)
(20%)(30%)
Target Contribution Margin - 15%
Break Even
(40%)
45Partners Key:
250 2000Enrolments Enrolments
2003 Results by Educational Partner
Note: Construction of this level of detail from the ABC Model result requires further analysis outside of the model.
Performance Management
The EconomicDenominator
DepartmentContribution
CourseLevel
Management
For USQ the economic denominator is the“Course Contribution Margin”
Course contribution targets will be set for each Faculty/ Department
A framework is being developed to address possiblecourse /program rationalization
EducationalPartners USQ has changed its Learning Management System
for online delivery and is now investigating an open source/open standards based approach
Performance Management (cont’d)
An Educational Partner Model is being developed addressing such issues as:
• Pricing model;• Standard Contract; and• “Partner non-performance” escape clauses
The University is in the process of setting targets for all output groups (Teaching, Research, Commercial, Community, etc).
University ExampleTotal Revenue $130M
Revenue from Teaching $110M
Return @ 5% = Net Profit $6M
Add: Investment in Research $10M
Add: Strategic Projects $8M
Required Contribution From Teaching $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”.
0
5
10
15
20
25
30
$M
537 Courses 528 Courses
The Economic Denominator
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