Costing Activities at ANU: insights

Costing Activities at ANU: insights Renée Brand Finance Manager College of Engineering & Computer Science 31 August 2011

Costing overview • What is costing & why look at costs • Expenses and Cost Pools • Activities • Cost Drivers • Applying costs to Activities • Example • Questions

What is costing? • Costing is a method of applying the costs of the organisation to a specific product or service to determine the full cost of the product or service

Why look at costs? • Know what our costs are • Determine what influences these costs eg student numbers, staff numbers • Fully cost projects • Make decisions based on these costs • How much will it cost if we increase our student numbers? • What project costs can we recover from a funding body and how much will the College contribute as in-kind?

Costing steps • Analyse the costs of an organisation and determine the cost pools • Determine the activities of the organisation • Determine what drives or influences these costs (cost drivers) • Attribute these costs across the activities of the organisation

1. What are our costs • Types of expenses: • Salaries & wages • Travel • Expendable research materials • Equipment (capital and non-capital) • Utilities & maintenance • IT equipment/services • Telephone & internet • Postage & stationery

Where are these costs incurred?

Cost Pools • Expenditure can be grouped into cost pools of similar type of expenditure • Generally costs are grouped where the expense is incurred (i.e. at ANU, College, School or Project level) • CECS example shown, though can differ for each College

2. What are our activities? • What products or services are we providing? • Academic/Teaching services vs. Administration services • CECS example shown, though are there any other activities you can think of?

3. Cost Drivers • What is a cost driver? • A factor that can cause a change in the cost of an activity • Cost drivers at the ANU • Student numbers • Staff numbers • Any others? Example – an increase in student numbers could result in an increase in teaching staff

Student numbers • What costs do students influence (drive)? • Student Services support • School Administration support • Scholarships • IT requirements • Building space • Electricity & gas usage • Any others?

Student numbers cont... • Who do we include • Undergraduate (UG) • Post graduate coursework (PGCW) • Higher Degree by Research (HDR) • Does each type of student incur a similar amount of expenditure (think of HDR vs. undergraduate student)

Staff numbers • What costs do staff drive? • College Administration support • School Administration support • Building space • Electricity & gas usage • IT requirements • Telephone/internet • Any others?

Staff numbers cont... • Who do we include • Staff • Adjuncts • Visiting Fellows • OT Visitors • Does each type of staff member incur a similar amount of expenditure? • Consider FTE vs. body count

4. Applying costs to activities • COST POOLS • University Admin • College Admin • Scholarships • Infrastructure • School Admin • Teaching & Research • Labs & Workshops • ACTIVITIES • College Admin • Scholarships • School Admin • Teaching & Research • Labs & Workshops COST DRIVER

Example - Laboratory Costs

Direct Costs

Indirect Costs How do we allocate the above costs to the lab? Now we will see how expenses and cost drivers interact.....

Indirect costs - School Administration

Indirect costs - College Administration

Indirect costs - Infrastructure Note – only included Utilities in above example

Indirect costs summary • Note – assume 3 staff work in labs • Note – excluded University Administration costs

Total Cost of Laboratory

What can we do with this information? • Use this information to determine a lab usage charge • Ensure accurate laboratory costs are included in project budgets • Determine which costs can be charged to a project and which are in-kind • We then know what parts of the lab are not funded by the project and need to be funded elsewhere

Questions???

Costing Activities at ANU: insights