Full costing of business programs: benefits and caveats

Abstract

Purpose To suggest an approach to program costing that includes the approaches and concepts developed in activity based costing. Design/methodology/approach The paper utilizes a hypothetical case study of an Executive MBA program as a means of illustrating the suggested approach to costing. Findings The paper illustrates both the benefits of using an activity based costing approach and the danger of allocating organizational sustaining costs to a specific program for the purpose of assessing the profitability of that program. Practical implications University and faculty administrators will understand the benefits of activity based costing and they will understand that they should not evaluate the profitability of a program (nor make decisions about the termination of a program) on the basis of allocated organizational sustaining costs. Originality/value The value of the paper is to university and faculty administrators, who will be able to utilize a new approach to costing university programs.

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