Is tuition set based on cost-plus pricing?
No. Cost-plus pricing is a common pricing method used and is used primarily because it is easy to calculate and requires little information. There are several varieties, but the common thread in all of them is that one first calculates the cost of the product, then includes an additional amount to represent profit. The basic idea is that first the cost of the unit of production is calculated and then an additional amount is added for a profit margin. In the university setting this method could be used to calculate direct costs, indirect costs, and fixed costs, whether related to the production and sale of the product or service or not. Then this value could be set as the price of tuition. Medical schools do not have transparent accounting methods that would allow cost-plus pricing. Instead pricing is based on a complicated mix of how much each school can garner from federal GME payments, state subsidies, private benefactors and alumnus and arcane declarations of the high cost of educat
