College and Research Libraries JOHN S. GIPSON ''Total Cost'' of Acquisitions in a Community College Total cost has apparently been seldom determined for library operations; yet it would seem to be necessary for deciding whether or not a change is in order. Total costs are herein determined of acquiring a book for use ($4.85) at Macomb County Community College library. The techniques applied are suggested for determining total costs of other library operations and in other locations. THE PURPOSE of this analysis is to show a methodology for determining the total cost associated with library operations. Quite often, a much lower figure is sub- stituted for total cost due to the com- plexities in determining total cost. Total cost is not always a popular product because operational costs are generally much larger than anticipated, even when simplified costing techniques are used; · less popularity is forthcoming when it is pointed out that the true costs are much higher than the already unex- pected high cost. But total cost is an important commodity when planning to modify or implement an operation. It needs to be as accurate as possible for effective planning. Obviously, to determine properly the total cost of an operation, all costs associated with the operation must be included. Often, for simplification, only the costs apparent to the casual observer are considered. This analysis attempts to consider all the costs associated with the operation. Often such costs are not readily available because of the inter- actions which occur. Most operational Mr. Gipson, formerly assistant professor of mathematics at Macomb Community College, Warren, Michigan, now resides in Mt. Clemens. costs can be isolated accurately, how- ever, if the operation is viewed from its proper perspective within the system. Total cost for an operation can be determined accurately by carefully ex- amining the costs associated with the operation; each operation of the library has the following costs associated with it: Materials cost Personnel cost Equipment cost Supplies cost Area cost These five cost items are simply the costs associated with any operation in- volving personnel. But each of these items contains some hidden costs which frequently are not considered in cost analysis. A method for isolating and de- termining the hidden as well as the obvious costs is needed. This analysis represents an effort to formulate such a method. The method employed is best illus- trated by carefully presenting the cost analysis for one specific operation. The Macomb County Community College ( MCCC) library has provided the infor- mation necessary for such an illustration. The operation chosen for illustration is the incorporation of a volume into the library holdings; the operation of select- / 273 274 I College & Research Libraries • July, 1967 TABLE 1 CosT oF MATERIALS Volume LC cards: cost of volume ( 10¢ for 1st card, 6¢ for each add.; average 6 per vol.) Book card Book pocket . Due date slip Label (on spine) ( 450 books per roll of 12.50) Paste, markers, misc. Total Materials Cost $.40 .004 .009 .002 .028 .007 $.45 + cost of volume ing, acquiring, and processing a volume for the library. That is, the operation which produces a volume on the library shelf ready for circulation. Materials Cost is the cost for materials consumed in producing the end product. For the illustrative example, the end product is a volume on the library shelf ready for circulation. Examples of materials associated with this product are: the volume itself, LC cards for the volume, book card, book pocket, due date slip, etc. Simple averaging pro- cedures are used to determine the cost per volume for such items. For example, to determine the average number of LC cards per volume, the total number of LC cards in the library is divided by the total number of volumes in the li- brary; the cost of other materials are found in a similar manner. A complete list of these materials including their costs is shown in Table 1. The procedure used in determining each cost included in the materials cost implies this cost is very accurate. Personnel Cost is the cost of personnel for the operation. For the illustrative ex- ample, this cost is not easily determined, especially as some of the personnel per- form more than one operation. The simplest technique for isolating this cost for each employee is to assign a percent- age to each employee which corresponds to the fractional amount of his time de- voted to this operation; this assigned per- centage could then be multiplied by the total cost for the employee, thereby de- termining the amount of his total cost to include in the personnel cost for this operation. Not only is this the simplest technique, but it is a satisfactory tech- nique when used with due caution and slight modification. Instead of assigning a percentage to each person representing the fractional amount of time he de- votes to this operation, assign percent- age estimates to each person represent- ing the fractional amount of time he de- votes to each of his duties, thereby ac- TABLE 2 CosT oF PERSONNEL ITEMS: Selecting-advertisements, applications, etc. Acquiring-interviews, correspondences, etc. Processing-employee records, orientation, payroll, sick leave, keys, etc. Terminating-closing file , references, etc. Benefits-insurance, parking, etc. Misc.-personal items areas, lounge areas, eating areas, atmosphere, breakage, pil- ferage, etc. Salary CosTs: Items 1-4-estimated by the business office to cost 5 per cent of salary for profession- al and clerical per- sonnel; 2 per cent for student person- nel . 5 per cent of salary Item 5-estimated by busi- ness office . Item 6-estimated at 1 per cent of salary; no estimate available from business of- $225.00 fice 1 per cent of salary Item 7 Total . 100 per cent of salary $225.00 + 106 p'er cent of salary Total Cost for Personnel $ 3.729 per volume "Total Cost'' of Acquisitions in a Community College I 275 counting for one hundred per cent of each employee's time. Since these per- centage estimates account for all man t hours for all employees, they must be as- signed so that each operation performed by the library has its appropriate man- hours assigned to it. Thus any over- estimate for one operation produces an underestimate in some other operation. This may not appear at first glance to increase the accuracy of the percentage estimate for the specific operation under consideration, but it does; because it places restrictions regarding the per- centage estimates assigned to each in- dividual for each operation; it also al- lows objective comparison of the per- centage estimates for the different opera- tions which helps to eliminate undue biasing of the estimates. These estimates could be determined more accurately by having each employee keep time work ~ sheets for a period of time; however, if the above procedure is followed care- fully and as objectively as possible, it is doubtful if the improvement in accuracy is worth the extra effort, especially for the illustrative example. There are other costs associated with employees. For example, the cost for the employee's files and paychecks, the cost of employee benefits such as in- surance, sick leave, and retirement funds. Also, the costs associated with providing lounging, eating, and parking facilities. A complete list of the details and the cost associated with personnel is shown in Table 2. The total cost for personnel ( $3.729 per vol. ) represents the total cost for personnel including all hidden, student, clerical, and professional costs for this operation. This cost can never be as accurate as other costs, but the cost given is satis- factory. Most likely it is the best possible due to the difficulties in isolating such costs and the built-in checks mentioned above used in determining the percent- , age estimates for each employee. Equipment Cost is the cost associated with the furniture and equipment used in performing the operation. For the il- lustrative example, these costs are cal- culated by amortizing the cost for each item of furniture and equipment over a minimum life expectancy. A minimum life expectancy produces a slightly larger amortized cost than would expected life, but with the rapid changes in modern technology few items are kept even to minimum life expectancy. Thus mini- mum life expectancy is a more appro- priate time for which to amortize costs. Also, since these items cannot be pur- chased on a prorated basis, there is the cost associated with the initial capital investment; this cost has been included by using 5 per cent simple interest on the capital investment. The total equipment cost is $.136 per volume. This cost could be a slight overesti- mate. Although every effort was made to include each item, some omissions are likely. Thus any overestimate due to the procedure of using the minimum life ex- pectancy is likely to be more than offset by the rapid changing technology and/or possible omissions. Supplies Cost is the cost associated with the supplies and/ or miscellaneous items used in performing the operation. For the illustrative example, this includes postage, small miscellaneous items of equipment, order blanks, paper, pens, envelopes, paper clips, and staples. This cost is not available as such for the ex- ample, but is estimated to be $.166 per volume. This is based on a percentage esti- mate for this operation multiplied by the total supplies cost for the library. This cost is likely an overestimate, but this supply cost includes postage and small miscellaneous items of equipment in addition to operational supplies. Area Cost is the cost associated with occupying an area-the area occupied by the personnel, materials, furniture, and 276 I College & Research Libraries • July, 1967 TABLE 3 ToTAL CosT Total material cost Total personnel cost Total equipment cost Total supplies cost . Total area cost Total $ .450 + cost of volume 3.729- .136 .166 .364 $4.845 + cost of volume equipment for the operation. For the il- lustrative example, the area cost is found by determining the floor space occupied by the operation, then prorating the cost of the building, maintenance (janitorial services included), utilities, and capital investment for the occupied floor space. This procedure produces $.364 per vol- ume as the total area cost for this opera- tion. The procedure employed for deter- mining the area cost suggests this cost is accurate. With the above total cost for each of the individual cost items, it is easy to de- termine total cost for the operation of incorporating a volume into the library holdings; the cost is simply the sum of the above five costs. This sum is shown in Table 3. This last number ( $4.845 + cost of vol- ume) represents the total cost for a vol- ume to arrive on the library shelf ready for circulation. CONCLUSION The .above illustration indicates that it is possible to isolate total cost for what may have originally been consid- ered a rather loosely defined operation which included some hidden costs. Nev- ertheless, total cost was found using the illustrated method, and it is a good estimate of the total cost for the opera- tion of incorporating a volume in the MCCC library for the fiscal year 1965-66. As a careful examination of the deriva- tions reveals, it is often more accurate to isolate an individual operational cost by isolating several operational costs simultaneously. Thus, much of the fun- damental analysis for other operational costs is available when one operational cost is found by the method illustrated. That is, other operational cost such as circulation cost, periodical cost, or patron cost, can now be found with minimum effort. This is another advantage of using this method to find "Total Cost." • •