ABSTRACT
A brief introduction to cost analysis Cost analysis relies on the systematic compilation of various types of programme variables and related costs. Number of courses, number of students a year, and life of course are essential details. All costs should be identified through a systematic process that values all resources necessary to replicate a programme (see Levin and McEwan, 2001). Even donated resources are included in the cost analysis since these have some value, regardless of who paid (or didn’t). Costs are usually categorized as either capital or recurrent, and fixed or variable. Capital costs are goods with an expected life of more than one year. Capital costs are ‘annualized’ to determine the cost per year (Jamison, Klees and Wells, 1978:32). Capital cost, C, is multiplied by an annualization factor determined by the following function:
where a(r, n) is the annualization factor r is the social discount rate n is the lifetime of capital. Recurrent costs refer to goods and services consumed immediately (labour, electricity, etc). Fixed costs
are not dependent on the scale of the programme, and variable costs are directly related to the number of students served.
