Marginal Costing Techniques for Higher Education

Title: Marginal Costing Techniques for Higher Education
Author: Allen, Richard
Brinkman, Paul
Date: 1983
Catalog #: 2BA356
Price: $ 5.00
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Marginal cost is defined as the change in total cost associated with producing an additional unit of output. The cost of providing educational services for an additional student is a critical concern in higher education, because so much of funding and resource allocation is directly or indirectly related to enrollment. Marginal costing provides a sensitivity to enrollment change that is usually missing in calculations of average cost. While marginal costing may be a highly desirable approach, say the authors, the procedure is quite complicated. They describe in some detail how several marginal-costing techniques can be used in higher education. Alternative Approaches: The book provides an overview of three marginal-costing procedures: statistical cost estimation using regression techniques, a fixed- and variable-cost method, and an incremental-cost method. Discussion then turns to the economic theory behind marginal costing, interpreted to apply to the higher-education context. The book concludes with a review of the literature on marginal-cost estimates for business and industry, hospitals, primary and secondary schools, and higher education. Illustrations based on actual data are used to explain how the various marginal-costing techniques work. The illustrations also provide a basis for discussing the difficulties that are likely to be encountered in working with cost data in higher education.