Chapter 18; Determining Program Costs

Question 1

What are the 6 steps of determining program costs?

Answer 1

1: determine if public, merit or private program
2: classify costs as line or service functions
3: prepare line-item budgets (find revenues with expenses)
4: allocate all service unit costs to line unit budget
5: perform cost-volume profit analysis
6: Establish a price

Question 2

what is a “unit”?

Answer 2

program, park , facility or other service amenity

Question 3

What is a line unit?

Answer 3

directly involved in production and delivery of outcome, staff that are involved in producing the outcome

Question 4

What is a service unit?

Answer 4

provide service to other units and to the whole, not in producing but serving

Question 5

What are direct costs?

Answer 5

costs that can be traced to specific cost objective (to purchase something)

Question 6

What are indirect costs?

Answer 6

overhead - stuff you don’t use to run a program (ex. electric bill)

Question 7

What is cost allocation?

Answer 7

process of identifying and assigning costs to various cost objectives, that are fair, reflect reality

Question 8

What are the 5 methods of cost allocation?

Answer 8

equal share of indirect expenses
percentage of budget
time budget study
cost tracking system
space or measurement studies

Question 9

What happens in the cost allocation method: Equal share of indirect expenses?

Answer 9

each functional line receives an equal share of indirect expenses, easiest but least accurate

Question 10

What happens in the cost allocation method: Percentage of Budget?

Answer 10

each line unit is assigned a % of indirect costs that equals its percentage of some overall budget figure, valid if percent of budget is equal too percent of time spent on it

Question 11

What happens in the cost allocation method: Time budget study?

Answer 11

time a service unit spends on each cost objective is studied. MOST ACCURATE but costly and time consuming, should be tracked every 3-5 yrs watching for dramatic shifts

Question 12

What happens in the cost allocation method: Cost-tracking system?

Answer 12

actual use of an item by cost objective is tracked and cost is charged based on time spent

Question 13

What happens in the cost allocation method: space or measurement studies

Answer 13

used when you can determine the proportion of cost to allocate a specific cost objective by measuring the relative proportion of overall costs that is being used by each cost objective

Question 14

Direct + Indirect cost = ?

Answer 14

total cost