Although the TC function provides complete information about the output-cost relationship, it is often convenient to analyse costs on a per unit of output basis, since the approach corresponds more closely to educational planning. Two different unit cost measures are widely used, and these are: average cost (AC) and marginal cost (MC).
Average Cost: It refers to the cost per unit of output (per successful student). AC = TC/n, n is the enrolment...(6)
In practical terms, unit cost of education simply refers to the number of pupils attending school. It is also called ‘effective’ costs of education which takes care of wastage in education.
Furthermore, it is sometimes argued that unit costs of education should be calculated per child of the relevant age-group population. This may reveal to some extent the ‘efficiency’ of the educational system. Efficiency is measured in terms of the coverage of the relevant age-group by the educational system. Moreover, at the macro level, cost of education per capita, takes into account the entire population of the region.
Summary
The selection of the unit should be influenced by the purpose of analysis. For example, (a) is the generally used concept in planning at every level of education. (b) is adopted when there arises a large difference between ‘reported’ enrolment and the actual attendance, particularly at lower levels of education where attendance is considered as indicator of educational performance. (c) is most suitable for manpower planning and related purposes. (d) and (e) are considered helpful in performance at the elementary level. (f) is used in the absence of detailed data. Hence, the selection of the unit in the unit costs depends upon the purpose at hand. As the costs are generally found to be highly sensitive to the number of students, the student is most often considered as the unit. But while calculating costs of classroom equipment, the class forms the right unit. The statistics on costs of education should refer to a time period, preferably calculated per year. Note that it will be suitable to calculate the unit cost the duration of a given level of education, ie is six-year time period of primary level etc. It is also rarely
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sometimes to calculate cost per working day or cost per teaching hour. But such costs; including annual costs at school (institutional) level, may not reflect the full cost of education. Eg, the retirement benefits which are also part of costs in education cannot be captured in such exercises.
In all, a detailed analysis of costs of education requires computing by levels and types of education such as pre-primary, primary, middle, secondary (general and vocational), higher (general and professional). This will depict the balance (or unbalanced) nature of investment in educational pyramid.
Also, further disaggregation of recurring and non-recurring items, would help to know the nature of production process, whether capital-intensive or labour intensive and the extent to which resources are utilised.
Marginal Costs: also known as incremental cost are costs incurred on an additional pupil or the additional cost attributable to an extra student, ie
MC = TCn+1 – TCn or MC = TCn - TCn-1 ...(7)
or MC is the change in TC for a change in output produced. MC = f (change in TC/q) =
The total and average costs are extensively used rather than the marginal cost in education. This is because the costs of enrolling one additional pupil in a school may sometimes be absent; as teachers‘ costs or costs on non-teaching staff may not necessarily change with every marginal change in the number of pupils. Similarly, if additional groups of pupils or classes are considered, the marginal cost concept may be more meaningful.
Determinants of Unit Costs
It is generally tested, sometimes confirmed or rejected that unit costs are inversely influenced by size of enrolments, teacher-pupil ratio, the average salary of the teacher, the ratio of the non-teaching staff cost to the teaching cost per pupil, etc. As such, a linear (or non-linear) regression equation is estimated as follows:
Unit cost = (Xi)...(8)
Where Xi is defined as set of variables such as the age of the institution, size of the
institution, class size (teacher-pupil ratio), teacher‘s average salary, proportion of the non-teaching cost, residential/or not, co-educational/or not, etc. Some variables could enter the regression equation as dummy variables. The regression coefficient explains the relative importance of a given variable influences the unit costs.
Costs of Education at Current and Constant Prices
The costs of education like any money-based statistics can be expressed at current (market) prices or constant prices.
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Costs of education expressed in current prices take care of price-inflation and thus represent the ‘real’ costs of education, considering the time period as well. This becomes important since changes in money value should be taken care of.
Costs of education expressed in current prices, when compared over a period of time, give a false picture, because during the same period the prices of goods and services might have increased, resulting in non-increase in real costs of education. Thus, the cost in constant prices might remain the same or be less than what the costs at current prices indicate.
There are two solutions to this problem:
One. recalculate the costs for a given year, applying each goods or services to its corresponding price during the base year. Two, construct an educational price index based on the prices of goods and services used in the educational process. These calculations require detailed information to execute this task.
In practice, cost at current prices can be converted at constant prices with one of the following:
a. national income deflators, b. Wholesale price index, c. Consumer price index, and d. Education price index.
The use of any of the three indices must be justified, (b),(c) and (a) are used to construct commodities that enter the education activity that may constitute a minor component of the basket of commodities. (c) may be adopted since education budgets are largely salary budgets. The use of (a) and (b) are more justified because, the education system involves other capital goods such as iron sheet, cement, etc. (c) and (a) are most widely used alternatives but only the second best.
Exercise
Exercise on how to do costing by using the ADEOP document Objective: improve quality of teaching and learning at the basic level Activity: Provide relevant opportunities for ICT.
Output target (payroll/emis) Estimated costs (GH¢) Cost items Baseline
(2010) 2012* 2013** Unit agency responsible Acquisition of land 1000 - Construction of ICT centre to house 80 Pcs 60,000 -
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Procurement of (45)
PCs/ laptops 1 @700 Additional 5 PC needed Additional 7 PCs PCs accessories (45
CD, 45 drives, etc.) 1 @20 5 in addition 7 Additional PCs accessories Procurement of
projector 1 @400 - -
Air conditions/fans (2) 1 @ 300 - - Risk allowance for 4
facilitators 20% of basic salary 20% of basic salary 1 facilitator (20% of BS) Furniture (45 pairs) 1 @ 50 Additional 5 Additional 7
Repair/ Maintenance 5% 5% 5%
Supporting materials
(eg 45 textbooks) 1@10 - -
Sub-total Sub-total Sub total Sub-total
Miscellaneous 10% of sub
total 10% of sub total 10% of sub total
Total cost Total cost Total cost Total cost
Enrolments = 45
*If enrolment increased by 10% due to the introduction of Capitation grants and School Feeding Programme, it will not be necessary to increase scale of operation (class size). ** 15% increase in enrolment, size of scale of operation remains unchanged (capital cost does not change).
Enrolments, average attendance and the promotion rate should be well noted to avoid misallocation of resources which can cause empty or overcrowded classrooms.
Unit agency responsible: District assembly, local authorities, municipal and other authorities responsible.
Funding source: MOE, Plan Ghana, UNICEF, GetFund, Internally Generated Funds, USAID, corporate bodies such as MTN, airtel etc, and other donor agencies.
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Bibliography
Burke, N. J. (1951). Financing public schools in the United States. New York: Harper
Publishers.
Coombs, P. H., & Hallack, J. (1988). Cost analysis in education. Baltimore: John Hopkins
University Press.
Hallack, J. (1969). The analysis of educational costs and expenditure. Paris: IIEP. Henry, L. (1988). Cost effectiveness analysis: A primer. Sage.
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