Example of A Full Economic Costing

Professor Smith wishes to make a research grant application for a 3-year research study. The following illustrates how he can use the Step-by-Step Guide to Costing to estimate the cost of the resources he will need to apply for.

Please note that all of the cost estimates shown below are for illustration purposes only and should not be considered to be true estimates.

 Step 1. Directly Incurred Costs

Professor Smith needs to start by estimating the costs of those resources that will be spent specifically to enable the project to be carried out.

  • Equipment.
    He gets a quote from a company for £15,000 including VAT.
  • Travel.
    He expects to make 5 International trips (each 5 days): £500 Flight
    £100 Accommodation/Food/local transport x 5 days = £500
    Total per trip = £1,000 x 5 trips = £5,000
  • Research Fellow. The assistance of a full-time research fellow will be required for the duration of the project (3 years). Professor Smith will need to ask his Accounting Team to provide the costs of this post. He will need to tell them the grade of post and the estimated start and end date.

    Salary cost of full-time Research Fellow provided as £96,000
  • Consumables. He estimates that he will need £10,000 worth of consumables over the life of the project.
  • Technicians. He doesn't feel he can justify employing a dedicated technician, but he will be using some technician time. As this time will be an estimate, this will be included below under Directly Allocated Costs.

Step 2. Estimating Investigator Time

The next step is to estimate the amount of his own time to be dedicated to the project and that of any other co-investigators. He follows the guide to estimating staff time to help him do this. He works out that his average working week equates to roughly 40 hours per week. This excludes travel to/from work and a daily 45min break for lunch.

He then uses the data submitted in his TRAC return to complete the Estimating Staff Time Template.

This leaves him with 13 hours a week available to spend on Research activities. Professor Smith always tries to have 2 research projects running at any time, although at times he has more or less than this depending on the available opportunities.

He therefore estimates that on average, he spends:

13 hours / 2 projects = 6.5 hours per project, per week

Professor Smith also considered the list of factors provided in the guide but feels that 6.5 hours are a good approximation for the time required for this project.



Step 3. Investigator Salary Costs & Other Directly Allocated Costs

Investigator Salary Costs

Professor Smith now needs to estimate the directly allocated costs of the project. These are the costs of the resources that are not specifically spent for a particular project but are the cost of shared resources to be used on the project.

  • Salary Cost of Principal Investigator

    He informs his Accounting Team of the average hours he estimated in Step 2 and the Start/End date of the project. He is then provided with the estimated salary costs (£54,000)

Other Directly Allocated Costs

  • Project Specific Staff Costs

    Pool Technicians

    It is expected that a number of experiments will be undertaken in a Laboratory as part of the research. Professor Smith needs to consider whether he will need the assistance of a Laboratory Technician, and if so, for how long.

    He estimates that he will require 5 days per month of a Technician (salary £16,000 pa) for the 3 years of the project:

    5 x 12 x 3 = 180 days x £100 per day = £18,000

 

  • Research Facilities/Existing Equipment

    Some of the experiments will involve the use of sophisticated microscope devices in the University's microscope facility. Professor Smith has been advised that the hourly charge for using the device is £35 per hour. He estimates that he needs 100 hours time per year:

    100 x 3 x £35 = £10,500

 

  • General Technical Services

    Professor Smith's School has established a General Technical Services charge. His Accounting Team provides him with a cost of £9000.

Step 4. Estates & Indirect Costs

Professor Smith is aware that the full Economic Cost of his research work requires an estimate to be made of the University's estate costs and corporate costs. His Accounting Team provide him with Estates costs of £38,000 based on the fact that this project is lab-based. He is also supplied with the Indirect Costs of the project which are £110,000.

Full Economic Cost (fEC) of the Research Project:

 

fec
Directly Incurred Costs:      
Research Fellow £96,000   
Equipment  £15,000  
Travel  £5,000   
Consumables  £10,000 £126,000
Investigator Costs    
Principal Investigator Salary Cost  £54,000  
Other Directly Allocated Costs    
Project Specific Staff Costs - Pool Technicians £18,000  
Research Facilities £10,500   
General Technical Services £9,000   
Estates Costs (Laboratory)   £38,000 £129,500 
Indirect Costs   £110,000
FULL ECONOMIC COST (fEC)   £365,500 
Please note that all cost estimates shown above are for illustration purposes only and should not be considered to be true estimates.