This assignment starts by describing the scenario of a project. In a second step it identifies the various ingredients required for the project and their unit costs. (The information included in this table you find repeated in the attached spreadsheet.) In a third section the assignment-tasks are specified.

These tasks mainly consist of simple calculations to be completed according to the cost-analysis outlined in the textbook. For completing them, please use the specified cost data provided even if they do differ from costs you know from your context. Include references to the textbook of G. Rumble to justify your solutions where appropriate. This applies especially to tasks 6 and 13 where you have to discuss the issue of annualization (task 6) and to summarize the argument in favor of the cost-efficiency of distance education (task 13).

The scenario

An undergraduate distance education college plans to offer an undergraduate course in The Formation of the European Union. The course is a three credit course and requires about 150 hours of study time (15 weeks at 10 hours per week). The course will be offered once a year.

Course material: the course is mainly print based. The course material is written by a consultant who is a renowned expert in the field. It consists of nine study guides of about 50 pages each and one additional reader (200 pages). Layout and design of the study guides and clearance of copy right will be done in-house. Together with the study guides come nine 60 min video tapes with documentation of important milestones in the formation of the European Union. The videos are profesionally edited and commented news clips. The development process extends over three years and will require a half of the per annum staff-time of a course manager and 1/4of a full time commitment of one secretarial staff.

The course is planned to be on offer for five years and is expected to attract 200 students per year. It is planned to update the course (two study guides) in year 3 and to present from year 4 onwards the re-developed version.

Student support: Students are supported by a tutor. The tutor will extensively comment on and mark three essay-type assignments during the course. Additionally, students may ask the tutor for support by telephone, email, or correspondence. Two 6 hour weekend seminars are offered in the 4th and 12th week.

Assessment: The student will be assessed on the basis of the seven essays which will be marked by the tutor.

Use the following specifications of costs for your cost-analysis:

The ingredients and their costs

1	Input	Unit of input	Amount of input	Cost per unit of input
2	Development
3	Course manager	per annum salary	1/2 of full-time post p.a. over three years of development	$70000
4	Secretarial support	per annum salary	1/4 of full-time post p.a. over three years of development	$23500
5	Printed material
6	Authoring study guides	per study guide (=50 pages)	nine	$14000
7	Editiong course reader	per reader (=200 pages)	one	$7600
8	Editing and design	per unit of 50 pages	thirteen (which includes the reader with 4 x 50 pp)	$3900
9	Copyright clearance	per unit of 50 pages	thirteen (which includes the reader)	$2400
10	Video cassettes
11	Copyright clearance	per 60 min tape	nine	$9500
12	Production	per 60 min tape	nine	$23000
13	Assignment
14	Development of assignment	per assignment	three	$350
15	Maintenance (part of printed material only)
16	Author	per study guide (updating)	two	$1100
17	Editing and design	per study guide (updating)	two	$2800
18	Presentation costs
19	Student support
20	Marking of assignment	per assignment	three	$45
21	Tutor	per hour of seminar of group size of 30	twelve	$65
22	Tutor expenses	per group of 30	one	$80
23	Production
24	Production of study guide	per study guide	nine	$8.90
25	Production of assignments	per supplementary unit	three	$1.20
26	Production of course reader	per reader	one	$16.00
27	Production of video cassette	per cassette	nine	$12.00
28	Packaging and postage	per mailing	three	$9.00
29	Income
30	Fee	per student per credit point	3	$420

The Task

Based on the above figures and the scenario, please, answer the following questions. Include references (not lengthy quotations) to sections of the textbook (Rumble, 1997) to support your argument where appropriate.

1. Classify the different cost items as either fixed or variable costs (matching row number to Fixed or Variable as appropriate).
2. Calculate the aggregate Fixed Costs of Development (FD) and the aggregate Fixed Costs of Maintenance (FM).
3. Calculate the variable cost per student (V)
4. Calculate the depreciation rate on a basis of the lifetime of the presentation of the project (compare Rumble Table 6.1) and charge it to each year of presentation. (You may use the format of the attached spreadsheet.)
5. Following the template of Rumble Table 6.4, annualize the Fixed Costs of Development (FD) over the five years of presentation at 5% interest and the Fixed Costs of Maintenance (FM) over two years at the same rate.
6. Summarize in a short paragraph the reasons for and against annualization.
7. Calculate the equation of total costs (TC=F+VxN) using the annualized figure of fixed costs and N=800
8. Draw the graph of the total cost function using, as above, the annualized figure of fixed costs while N varies over the accumulated number of students (i.e. N= 200, 400, etc.)
9. Calculate the equation of average costs (AC=F/N+V) using the annualized figure for fixed costs and N=800
10. Draw the graph of the average cost function, using, as above, the annualized figure of fixed costs while N varies over the accumulated number of students (i.e. N= 200, 400, etc.)
11. If the student is charged the per student fee specified, calculate the break-even point. (Use the equation TC=F+VxN and the income equation: I=SFxN (Income =Student fee x No of students). The break-even point is N=F/(SF-V)
12. Represent the break even point graphically (overlaying the graphs of TC and I).
13. Summarize in a short paragraph why it is believed that the TC and AC equations and the specific cost structure of DE suggests that DE may be more cost-efficient than conventional modes of educational provision.

Note that you need to attach an Excel file to show your calculation. Make sure that your calculations are reflected in the Excel sheet. However you need to summarize your answers to the 13 questions in a separate text file.