A suggested methodology for calculating the cost of university graduates

Costs are the valuations placed on the use of resources; they include operating and opportunity costs. As such they vary according to one's orientation. In higher education, costs can be evaluated from the point of view of three entities: the university as an economic firm (institutional cost); the students as private individuals (private cost); and society at large (social cost). This paper considers the institutional costs of higher education.Based on a hypothetical college model, two methodologies are suggested for evaluating the institutional costs in the “production’ of university graduates. The net-value-added method assumes that the cost of dropouts is inherent in the cost of graduates. The cost-per-student-year method assumes that dropouts and graduates are joint products of the educational system each with their own separate costs.The application of the two cost models is demonstrated with empirical data based on the University of Mosul in Iraq. The implications of the suggested methodologies for institutions with diverse specializations, high dropout rates, or large proportions of transfer students are also discussed.