Q: We have been asked to provide our Town Manager with data on the following: Production costs of brochure in relation to the cost for each program listed in the brochure, taking into account staff time, in preparing the courses, research, entering data into our programming software, development of brochure, proofing, etc. Also, is there a spreadsheet that we can use to calculate the actual cost of a program?

A: The best way to assign costs is to use the LERN financial formula. This includes the following:

Income (always 100%)

Promotion

Production

Direct costs (sum of promotion and production)

Operating margin (difference between income and direct costs)

General and Administrative Costs

Surplus

You can use this formula for your entire program, a section of your programs (e.g., business classes) or for individual classes. Here is what to do:

Determine the income from the course. Let's say that you are offering Project Management for Beginners. The income from this course is $1000.

You can determine how much it costs to include this course in your brochure, but for ease of calculation, let's say it costs $100.

Next, figure your production costs on this course. The main expense here is teacher pay, and let's say that is 40% of income or $400.

Now, we can figure that it costs $500 or( 50% of income) to promote and produce this course. This leaves you an operating margin of 50% or $500 to pay your General and Administrative expenses.

The ideal percentages in LERN's financial format are:

Promotion: 15 to 20%

Production: 30-35%

Direct Costs: 50%

Operating Margin: 50%

General and Administrative costs: 45%

Surplus 5%

By using this formula, you can determine which courses are pulling their own weight and which are not. If a course has an operating margin of 20%, it is using a lot of resources, even if it is generating a lot of income. You need to look at ways to improve the operating margin by either increasing income, reducing promotion expenses or reducing production cost.