In times of financial crisis, low enrolment courses are usually targets for removal. But removing the wrong courses could lead to a worse financial position!
Due to the financial impacts of the current pandemic, institutions are taking a serious look at all of their programs and courses to determine their financial performance. The typical targets for review are low enrolment courses but the big question is, how low is low? Some low enrolment courses could still be making a positive margin.
To figure out which courses to review, you need to understand the break-even point and to calculate this properly you need know your direct and overhead costs and also your variable and fixed costs.
It’s also very important to understand that a course that appears to be losing money can still be covering its direct costs and contributing towards some of the overhead, just not all of it.
Removing these courses without fully understanding their contribution to the overall school bottom line could actually lead to a worse financial position.
In this video we’ll show you how to undertake this type of analysis.
I have a general question on calculating breakeven at the course level. The question is the State Appropriation Funds allocated to Universities. We currently have split the funds into Instruction and Research. When calculating the course revenue do you exclude the Research funds as they are restricted? Any help would be greatly appreciated.
Hi Francisco, Yes that’s correct, we would exclude research funds when calculating course revenue. We normally split the “outputs” of the university into Teaching, Research, Commercial, Community Support and/or Out-of-Scope. We would take Research revenue and expenses identified in the General Ledger and allocate it to a research activity and then to a research cost object (output). The level of detail will vary from institution to institution, sometimes it may be one big research bucket, it could be broken out into externally funded research and internally funded research, sometimes it may be at the same level as the GL. We have gone into more detail for one specific client, where they wanted to identify different research projects, but this is rare, the biggest issue is identifying who specifically worked on which project. Overall though, the objective is to keep research revenue and expense separated from teaching research and expense.
Hope this helps.
Cheers,
Lea
This article may help as well https://www.pilbaragroup.com/higher-education-shared-governance-data-requirement-2-understanding-teaching-and-research-relationships/