One of the motivations to start this site and to begin the establishment of AAEA is the soaring of higher cost of education in the US.  Today we learned from three different administrators why such increasing in the US higher ed cost occurred.  From this panel, one can sum two main reasons and they are decreasing state funding (revenue) and increasing operational expenses.  For some, these reasons are not good enough.  They are typical, old and scapegoat reasons.  The two afore mentioned elements are nothing but showing the dynamic that is happening or could happen in any industry.

College decision makers are hired to deal and adapt with the dynamics and adopt new approaches to prevent the ship from sinking.  The Association has done intensive econometrics studies to unveil these mysteries.  To read them, please click here.

One member of the panel suggests an interesting point in that the cost of education is higher because increasing time-to-complete a degree.  What he was trying to say, instead of graduating within a normal time, it may take a student to graduate longer.  All of the reasons mentioned make perfect sense.  But it does not offer viable solutions, other than to justify increasing cost of education, and therefore it is okay to pass all cost of operations (including the inefficiencies) to the buyers.  Has anyone tried to control the overhead cost?  If yes, what approaches have been done?  Standard Costing?  Weighted average costing?  Process costing?

So the next question one may have is how to manage all these changes or are there a better ways?  To answer this simple question, the administrators could refer to what has happened in the manufacturing industries with all the fancy ideas discussed in the Managerial Accounting.  Have they done these homework?  Where is the Institutional Effectiveness’ (IE) role in such a case?  Does the IE, CFO or the COO get involved in the products’ costing? If these unite operate based on the “old mindset”, then there is no surprise.  This is one of the many roles that the new IRI paradigm comes into action.