Allocating University Administrative Costs in a Responsibility-Centered Management (RCM) Model

RCM has recently become popular with university presidents across the U.S. Many deci­sions are being made about revenue and cost allocation without serious thought to the conse­quences. In this case, we provide numerous avenues for the students to discuss additional rev­enue and cost allocations approaches. Generally, revenue allocation is done based on student credit hours (SCH) and the number of majors. In this case, we look at different percentages of the revenues being allocated on SCH and the numbers of majors. We also introduce the percentage of students who graduate from a specific college and nongeneral education SCHs. Finally, we exam­ine the difference between apportioning administrative costs based on a fixed rate of revenues (revenue tax rate) or an activity-based costing approach. As the instructor, you can focus on the issues you want or ask your students to think like a college dean