Q: If we paid an instructor $50 an hour - what is the formula for determining the tuition we should charge. You can use the example of a 8 hour class.
A: There are some very good reasons to pay instructors variable rates. The most important reason is that your courses need to be financially successful. In order to do that, you need to manage your costs. Overall, the production cost of any course (and of your program overall) should not exceed 40 percent of the course income. The major component of your production costs is instructor pay. Often this is the only production cost. The LERN benchmarks for expenses are 20% maximum for promotion and 40% maximum for production. This gives you a 40% "profit" or operating margin that you can use to meet all your other general and administrative expenses. If you are paying more than 40% of income to your instructors, overall, then your program is not financially stable. If you are paying more than 40% of income for a specific course, then that course is not making money for you and is a drag on your overall profitability.