# Service Costing for Educational Institutes

## Why Service Costing for Educational Institutes?

Educational Institutes (schools, colleges, coaching institutes) deliver an intangible service — education. To compute the cost per student / per course and fix fees, service costing principles are applied.

## Two Buckets of Expenses

### 1. Expenses Directly Traceable to ONE Course

Expenses that can be linked to a specific course:

Salary of faculty teaching only that course
Course-specific study material
Lab/equipment exclusively for that course
Guest lecturer fee for that course

Recovery basis: divided by number of students in that course.

### 2. Expenses NOT Directly Traceable

Common costs that benefit all students:

Building rent, electricity, water
General administration, principal/director salary
Library, common labs
Common stationery, security

Recovery basis: apportioned on the basis of total students across all courses.

## Cost Per Student — Formula

```

Cost per student of Course X

= (Direct cost of Course X / Students in Course X)

+ (Total Indirect cost / Total students of institute)

```

## Use in Fee Fixation

Once per-student cost is calculated, the institute adds a desired margin (or surplus, if a not-for-profit institute) to arrive at the fee.

Worked example

### Example 1

Illustration — Coaching Institute

A CA coaching institute runs two courses:

CA Foundation — 200 students, direct cost ₹10,00,000
CA Inter — 300 students, direct cost ₹24,00,000
Common indirect cost (rent, admin etc.) = ₹15,00,000

Calculate cost per student for each course.

Solution:

Total students = 500

Indirect cost per student = 15,00,000 / 500 = ₹3,000

CA Foundation:

Direct per student = 10,00,000 / 200 = ₹5,000
+ Indirect = ₹3,000
Cost per Foundation student = ₹8,000

CA Inter:

Direct per student = 24,00,000 / 300 = ₹8,000
+ Indirect = ₹3,000
Cost per Inter student = ₹11,000

⚠️ Common exam mistakes

Apportioning indirect costs on the basis of students in one course rather than total students.
Treating faculty salary (who teaches only one course) as common cost — it is direct.
Ignoring distinction between direct and common costs, which distorts fee fixation.

Reference:

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