Cost Management in a University
Most states now require five years of education for accounting graduates to sit for the Certified Public Accountant (CPA) examination. Many accounting jobs, however, do not require a CPA license, so many students still seek only four-year degrees. The Business School at Cassidy University offers three degrees in accounting: (1) Bachelor of Science (BS) in Accounting, (2) Masters of Professional Accountancy (MPA), and (3) Master of Business Administration in Accounting (MBA). Tuition for a semester of graduate study costs approximately twice as much as a semester of undergraduate study. Undergraduate students who meet certain academic requirements are normally admitted to the BS program at the end of their sophomore year after taking a series of prerequisite courses. The school operates undergraduate and graduate placement services to assist students in finding employment. The school also operates an Accounting Graduate Programs office with a staff to administer the accounting graduate programs. The programs office has an annual budget that sets targets for tuition revenues, teaching costs, administrative costs, and merit-based financial aid provided to students. The school is adding a new building to accommodate its graduate programs.
The BS degree is a four-year degree with a curriculum similar to other four-year accounting programs. Each year the school graduates about 275 students with this degree. Some graduated of the BS are employed as management accountants by corporations or governments. Others are employed by CPA firms and expect to complete a fifth year of education later. Undergraduate tuition costs are similar to those at other universities.
The MBA is a two-year degree in which high-performing students can convert to graduate student status at the end of their junior year in the BS program and continue their education for two more years. Upon graduation, these students receive both BS and MBA degrees. In the first year of the MBA program, students take graduate courses in a broad variety of disciplines such as accounting, economics, finance, information systems, marketing, and quantitative methods. Using a series of intensive business simulations the students learn how to integrate six basic business processes to achieve business success. In the second year of the MBA, accounting students take one of four accounting tracks: consulting, assurance, taxation or information systems. In addition to an accounting track, the students also take a complementary, nonaccounting concentration of advanced graduate courses in areas finance, marketing, operations, or tax law. Finally, the students receive instructions in leadership, cognitive development, oral and written communications, and self assessment skills throughout the two years of graduate study. The school expects to graduate about 60-120 students each year from the MBA program. Recently, graduates of the MBA program received starting salaries approximately 33% higher than graduates of the BS program.
The MPA is a one-year degree with a BS degree as a prerequisite for entry. Admitted students have grade point averages and standardized test scores similar to students admitted to the MBA programs. The curriculum in the one year of graduate study is similar to that of the second year of the MBA program. The school expects to graduate about 80 students each year from the MPA program. Most students entering the MPA program come from undergraduates programs at other schools. Recently, graduates of the MPA program received starting salaries approximately 20% higher than graduates of the BS program.
Required
a) What are the major cost drivers involved in the school's educational process? How do you think the school might attempt to control costs?
b) Describe how the Business School adds value and who receives this value.