4. Cost Structures

Question 1

Opportunity cost

Answer 1

The alternative opportunities that are given up in order to spend resources in a particular way

Question 2

Cost consciousness
and
Budget consciousness

Answer 2

The full awareness of the value of alternatives foregone

budget consciousness as awareness of the financial implications of an activity or decision. be mindful of the difference between cost and budget consciousness

Question 3

Sunk costs

Answer 3

Costs that need to be incurred to take advantage of some opportunity. Once incurred they are difficult to recover in full

Question 4

Recurrent costs

Answer 4

Have to be met year-on-year. Related to the numbers involved in a school e.g. teachers salaries, stationery.

Question 5

Capital costs

Answer 5

Used for the purchase of durable assets e.g. buildings.

Possible to get a year-on-year cost by using depreciation plus interest formula

Question 6

Direct costs

Answer 6

Attributed to one particular course e.g. costs of running a science lesson including staff, teaching and equipment.

• Not all teachers on the same salary
• The number of students it is possible to teach varies according to pedagogy

Question 7

Indirect costs

Answer 7

Incurred whether the school has students or not e.g. admin staff

• Rooms vary in size
• Admin costs can be shared between all students but some need more e.g. counselling, learning support

Question 8

Variable costs

Answer 8

Have to be increased according to the numbers involved

Question 9

Fixed costs

Answer 9

Have to be met irrespective of the number of students involved.

Question 10

Total costs and average costs

Answer 10

Total costs are all added up and then dividing the total cost for the number of students equals average costs that arise from the education of one student

Question 11

Read Maureen Woodhall. Add notes

Answer 11

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