1. Cost Consequence Analysis Workshop Costing Paul Leak

2. C osting Overview Time effects Which Costs Cost Consequence Workshop

3. Opportunity Cost …of a choice is the next best alternative foregone.

4. Opportunity Cost Allocation Decisions. Utilisation Decisions.

5. Economic cost The sum required to obtain use of a resource. Accounting cost Cost of used to generate income. If not Opportunity Cost…

6. Types of Cost Direct Indirect

7. Direct Cost … is a cost that is directly caused by the particular cost object under consideration.

8. Indirect Cost … is a cost that is not directly caused by the particular cost object under consideration.

9. Cost Object A cost which is an indirect cost for one cost object may be a direct cost for another.

10. Examples

11. Cost Behaviour Variable Cost Fixed Cost

12. Variable Costs Costs that vary Directly in proportion to the level of activity.

13. Variable Costs Examples: Disposable gloves Dental filling material Medicines Consider Cost Drivers

14. Variable Costs

15. Fixed Costs Costs that do not vary with the level of activity.

16. Fixed Costs Examples: Building Rent/Depreciation Network infrastructure costs NHS Board Finance teams

17. Fixed Costs

18. Fixed Costs aren’t really Fixed: Relevant Range

19. Cost Behaviour Summary

20. Which Cost to Use Study Question Study Perspective

21. Study Question Total Cost: Sum of costs of an activity. Average Cost: Total Cost/Total Activity Marginal Cost: Cost of change in activity

22. Study Perspective NHS NHS and Social Work Statutory, independent, third sector Providers and patients & carers Societal

23. Time Effects Current value of future costs & benefits Delays and Learning effect

24. Current Value of future costs Problem: £1 now is worth more that £1 in the future. Solution: State future costs at current value by discounting them.

25. Delays and Learning effect Problem: Effects and costs measured in the study period may be different in the future. Solution: Projections.

26. Practical Constraints Data Induction

27. Data Existing data:  Barriers to Obtaining collected data;  Quality. New data  Consistency  Quality

28. Data Sources Local Accountants; ISD-cost book and HRG datasets; Local Information departments; LFR returns.

29. Induction Transferability Analysis Projections Modeling