Activity Based Costing Project 2003 2005 Executive Summary

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Activity Based Costing Project 2003 -
2005Executive Summary
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USQ Student Enrolments 2004
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The Economic Denominator
The Activity Based Costing Project sought to
address the question What drives USQs Economic
Engine?
The Hedgehog Concept Collins, 2001.
What are you deeply passionate about?
What you can be the best in the world at?
What drives your economic engine?
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?
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Methodology
ABC 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.
RESOURCES
ACTIVITIES
COST OBJECTS
Courses
Preparing Lectures
Preparing Lectures
Delivery Modes
Preparing Lectures
Faculties
Preparing Lectures
Programs
Preparing Lectures
ACC 1100
Delivering Lectures
Payroll System
Delivering Lectures
Delivering Lectures
B. Bus
SCC1123
Delivering Lectures
Delivering Lectures
Academic Support
B. Sc
Student Records System
Assessing Students
Assessing Students
Assessing Students
Students
B. Arts
Assessing Students
Time Surveys
Assessing Students
M. Bus
International Onshore
Administration Support
M. Sc
Liaising with Students
International Offshore
M. IB
Marketing
Supporting Student
Domestic HECS
Researching
Research Support
Domestic Fee Paying
Enrolling Students
Library
Research
Business Sustaining
Financial Systems
Grants
Providing Library Services
Finance, IT, HR
Leadership
Publications
Strategy
Providing Corporate Services
Facilities
Govern
HRD Completions
Compliance
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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.
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2003 Results Course Contribution Cliff
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.
10M in value is eroded by 200 courses
537 Courses
528 Courses
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2003 Results by Faculty
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.
Contribution Margin 15
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2003 Results by Delivery Mode
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.
Contribution Margin 15
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2003 Results by Educational Partner
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.
Target Contribution Margin - 15
20
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Break Even
Contribution (000)
45 Partners
Key 250 2000 Enrolments Enrolment
s
(10)
(20)
(40)
(30)
Revenue (000)
Note Construction of this level of detail from
the ABC Model result requires further analysis
outside of the model.
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Performance Management
For USQ the economic denominator is the Course
Contribution Margin
The Economic Denominator
Course contribution targets will be set for each
Faculty/ Department
Department Contribution
Course Level Management
A framework is being developed to address
possible course /program rationalization
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Performance Management (contd)
Educational Partners
USQ has changed its Learning Management System
for online delivery and is now investigating an
open source/open standards based approach

• An Educational Partner Model is being developed
  addressing such issues as
• Pricing model
• Standard Contract and
• Partner non-performance escape clauses

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The Economic Denominator
The University is in the process of setting
targets for all output groups (Teaching,
Research, Commercial, Community, etc).
Course contribution is the Economic Denominator.
Well structured programs with a reasonable sized
student cohort deliver a 30 - 40 Contribution
Margin
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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.
537 Courses
528 Courses
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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