# Episode 6: The Full Cost of Service

Builds full service costs from direct work, shared support, capital, and overhead.

## Sources and attribution

- [Cost Analysis](https://uw.pressbooks.pub/financialstrategy/chapter/cost-analysis/) by Sharon Kioko and Justin Marlowe; published by University of Washington Pressbooks.
- [Budget Documents](https://www.torranceca.gov/Government/Departments-Offices/Departments-Offices/Finance/Budget-Documents) by City of Torrance; published by City of Torrance.

This episode is an independent study production based on the sources listed above. Source attribution does not imply affiliation, approval, sponsorship, or endorsement by any author, publisher, or institution.

## License

CC BY 4.0; adapted by condensation, paraphrase, and reorganization; third-party material excluded; Official local source; titles, high-level facts, and links used; no broad open license identified

## Production notes

Independent educational adaptation. Not financial, accounting, investment, or legal advice, and not endorsed by the source authors or publisher. The narration is an original synthesis. Verify current law, guidance, course requirements, and source terms before relying on it.

Stable episode ID: `4fc9cc19-0b8a-5a39-8308-dde55bdd7080`

## Transcript

The price on an invoice is rarely the full cost of a public service. Cost analysis gathers the resources required to produce an output and assigns shared support in a way suited to the decision.

This episode adapts Kioko and Marlowe's chapter Cost Analysis, published by University of Washington Pressbooks under Creative Commons Attribution 4.0 except where otherwise noted. It condenses, paraphrases, and reorganizes the authors' explanatory prose. Third-party cases, examples, figures, tables, quotations, and linked resources are excluded.

Direct costs can be traced to a service, project, or client. Indirect costs support several activities, such as payroll, information technology, facilities, legal services, and supervision. Labor cost includes compensation beyond wages. Capital use, maintenance, insurance, and administration can matter even when no new check is written.

Define the cost object before calculating. A permit, inspection, library hour, lane-mile, emergency response, or entire program will require different boundaries. State the time period and whether the purpose is fee setting, grant reimbursement, comparison, outsourcing, or long-range planning.

Shared costs need a documented allocation base with a plausible relationship to resource use. Headcount, labor hours, transactions, square footage, or direct cost may each be appropriate in a particular pool. False precision does not improve a weak causal relationship, so sensitivity analysis should show how allocation choices affect results.

Keep accounting cost, budget impact, and economic opportunity cost distinct. A resource can have no new cash payment yet still be scarce. Conversely, an allocated cost can appear in a full-cost model even when eliminating one service would not remove that cost. The question determines which cost concept belongs in the answer.

Torrance application segment. This original local exercise is separate from the textbook and cites the City of Torrance Budget Documents page, checked October seventh, twenty twenty-six, at torrance C A dot gov slash Government slash Departments Offices slash Finance slash Budget Documents.

For a hypothetical permit service, define the cost object as one completed permit and the period as one fiscal year. Identify direct review labor, supervision, technology, facilities, payment processing, records work, and relevant capital use. Document each allocation base and show a sensitivity range. Then compare full cost with any proposed charge while keeping access and broader public benefit as explicit policy questions. Do not infer Torrance's actual fee basis from this example, and consult current adopted records before using local figures.

Full cost is an input to policy, not an automatic price. A government may subsidize a service for access, equity, prevention, or community-wide benefit. The essential practice is to make the subsidy and its rationale visible.

This adaptation credits Sharon Kioko and Justin Marlowe and is licensed under Creative Commons Attribution 4.0. Changes include condensation, paraphrase, reorganization, and a separately sourced Torrance application. No author, publisher, or City endorsement is implied.