You can probably look at the rest of the spreadsheet and understand why figures are included in some cells and not others.
The Total costs row gives the annual cost of each project. The Unit costs row is calculated by estimating the number of units supplied in the year and dividing the total cost by these units. Care needs to be taken in choosing a suitable unit for measuring a project. The simplest is often the cost per hour. Other units that could be used are cost per case for case work, cost per visit or cost per client for home visits and cost per meal for the Lunch Club.
You should consider whether a particular unit is economically sensible and, if it is used in a service agreement or contract, are you confident that the target set is achievable?
Surveys of advice work have shown that most cases are simple and can be completed in under 20 minutes, but 20% of cases are extremely complicated and can take over 5 hours. Having a contract that pays a price per case may result in the more complex cases being turned away because they are uneconomic. One could have a fixed price for short cases and a different price for long cases or be paid by the case work hour.
The Supplementary School might have a cost per pupil hour, but there are often weeks when significant numbers of children have flu. A better unit might be the number of children on the register and attending at least 75% of the time.
This a different approach. A percentage of each project’s income goes to meet central administration and management costs. With this method, Management and Administration is also a cost centre. Twenty five per cent of income is sometimes used as the top-slicing charge.
In the example the unit costs are given at the bottom of the table and have been calculated in the following ways.
Advice & Advocacy | The cost per hour of advice work assuming the co-ordinator works a 45-week year is £24.24. This can then be represented as £12.12 per case for one hundred and eighty short twenty-minute cases and £121.20 per case for forty-five long five-hour cases.
Counselling | The cost per hour for ten hours a week for fifty weeks a year is £22.77. This can be represented as £592 for clients attending 6 months of therapy.
Visits | The cost per visit is £10.28 based on 740 visits a year and the cost per client is £51.38 based on 148 clients a year.
Supplementary School | The cost per pupil year is £198.97 based on thirty pupils a year.
Youth Activities | The cost per 3-hour session is £49.67 based on 52 sessions. This can be represented as £3.31 per youth per session if an average of 15 attend each session.
Lunch Club | The cost per meal of £6.10 is based on 28 meals a week for 52 weeks.
Outings/Events | The cost per person of £22.88 is based on two events with fifty people at each event.
Commercial Translation | Cost per hour: £24.06 for 180 hours a year.
The Tadshal Association receives a grant of £25,000 from Social Services and grants of £26,000 from trusts. Social Services wanted to know what services they were funding – Advice, Counselling, Home and NHS visits and the Lunch Club – were costing them. The total for these cost centres is £35,499, so the Social Services grant is meeting 70% of the cost. This means that each unit cost can be reduced by 30% when it is reported to Social Services. So, for example, Social Services is paying £4.27 towards the cost of each Lunch Club meal, which is the unit cost to them.
The columns Fundraising and Charities Act Administration are calculated slightly differently. They are included to provide information for the auditor or independent examiner but are not cost centres. The figure (£)1,217 was obtained by multiplying the co-ordinator’s salary costs by 2/35 as she spends on average two hours out of each 35 hour week on fund raising. Similarly the figure (£)188 in office rent was obtained by multiplying the total rent 3292 by 2/35 the amount of office time spent on fundraising.
The figures (£)220 in management committee expense and (£)600 for auditing are the total expenditures on these headings. They are shown in full because they are expenditure that must be declared under Charity Administration for the Charities Act.
The figures in the Fundraising and Charities Act Administration columns have already been apportioned in the unit cost columns so they are not included in the total column.
Price is not the same as cost. When pricing the services one should add a contingency for things going wrong. Some people add 5%. Consider what the highest price is that the funder will pay. Think about who else they could purchase the service from. Would they charge more or less? There is nothing wrong with making a profit. It can be used to develop other activities. If you subsidise the service by charging at below cost, you must be sure that you have other sources of funds or sufficient reserves to support the subsidised price.
Last updated: Mon, Mar 31 2008 - 04:36:28 PM
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