What is involved in cost forecasting and cost analysis?

In preparing a budget, a distance teaching institution needs to forecast two types of costs: fixed and variable. The main fixed costs are likely to be capital investment and the salaries of full-time staff. Capital investment is needed for buildings and production facilities, such as television studios and printing presses. Of course, it may be possible to contract production services and thus reduce fixed costs. Salary costs will be determined by the extent to which the institution hires its own content and learner support specialists and how much it depends on consultants and part-time help.

Variable costs are those that depend on the number, size, and quality of courses and those that depend on the number of students in the course. The first group includes the salaries of part-time staff (which vary with the length and nature of the course) and transmission costs (which vary with the length of the course). The second includes payments to learner support staff (which vary with such factors as the number of tutorials and the amount of feedback on assignments) and the costs of distribution (such as warehousing and mailing costs).

Cost forecasts for the design and production of materials must be based on assumptions about the number of students to take the courses, the costs of materials and labor, and the number of courses to be produced. Clearly, institutions' budgets will vary considerably, depending on their investment in face-to-face sessions, the technologies they use, the number of students, and the quality of materials.