Big bills left on the cloisters: fixed cost confusions at Australian universities (with Frank Zhang, UQ)

Abstract

Management errors in decision making have many sources, for which improved processes can help. Errors rooted in conceptual confusions, however, appear to be more stubborn. One particularly insidious source arises when an organisation allocates fixed costs to product lines before assessing their profitability. It is insidious because even our economics textbooks give vague and sometimes contradictory advice regarding the nature of costs. When key performance indicators conflate the costs of different types, management of scarce resources can go awry. Large, non-profit maximising organisations with a high ratio of fixed to variable costs are particularly at risk, such as the Australian university. We offer clarification from first principles on the conceptual issues surrounding costs and conclude with some practical recommendations for management.

About the presenter's visit

Professor David Butler will be visiting the School of Economics on Friday 20^th September 2019.  While here he will be using room 520A Colin Clark Building.  If you would like to meet with him or have lunch or dinner with him please contact A/Prof Lana Friesen who will be his host while at The University of Queensland.  A/Prof Friesen can be contacted on l.friesen@uq.edu.au.