Case Analysis On Piedmont University

CONCEPCION, Alfredo Crisanto N.
August 27, 2022
MBA-1A – 83B – 1:00PM–4:00PM Prof. Ma. Lourdes Salazar
A Case Analysis on Piedmont University
1. How should each of the issues described above be resolved?
CENTRAL ADMINISTRATIVE COSTS
The issue with the central administrative department is that there are no
costs allocated to the academic departments even though a fair share of the
said costs are associated with the undergraduate school. The way to resolve
the issue is to treat each academic department as a profit center and allocate
the central administrative costs based on how much each department incurs
costs. This method will also the deans’ concern over having costs that they
can’t control since allocating the costs to each academic department will
determine how much costs a specific department incurs for a specific period.
GIFTS AND ENDOWMENT
Currently, the deans’ issue is that the president has too much authority on
the allocation of the profit from gifts and endowment. A solution to the
problem is an introduction of a board of directors. The board will discuss with
the deans from each academic department on how to allocate the income
from gifts and endowment and will present their discussions to the president
for his/her final decision on the matter.
ATHLETIC
The revenue generated by the Piedmont’s athletic department is not

enough to cover its operating costs. The athletic department should start
charging the students for use of their facilities or equipment to create more
revenue for the department. Piedmont University can also add an “Athletics
Fee” on the tuition fee of students.
MAINTENANCE
Substantial maintenance work at the request of the school in each

academic department is done by the central maintenance department. It was
proposed that these kinds of maintenance work should be charged to schools
and other profit centers for the actual cost of the work, both direct and indirect
cost. Piedmont should accept this proposal for better control of the cost.
Outside contractors, that are cheaper in cost compared to the central
maintenance department, can be an option for the profit centers but it’s not
practical. The decision of hiring outside contractors to do a specific
maintenance work in the school should be an issue of the maintenance
department and not the profit centers, since the maintenance department can
determine if they have the ability to do the work and if not, then they can
recommend to the profit centers to hire outside contractors.
COMPUTERS
Piedmont University should start establishing a central IT department so

that computer usage from each profit centered can be monitored and
recorded. The usage of the computers by students and faculty staff should be
controlled based on the allocated budget to the department. A “Computer
Fee” can be charged to the students’ tuition fee to help recover the costs of
the computers.
LIBRARY
The proposal for the university library is to charge students and faculty
staff for the books borrowed either by an annual fee or by usage. Since
charging students and staff for borrowing books based on usage or hours is
uncommon practice in other universities, Piedmont University can establish
an annual fee. This fee can be added into a student’s tuition fee. The
university library can charge fees when borrowed books are overdue in
return.
CROSS REGISTRATION
Currently, students enrolled at one school could take courses at another

school without charge. The university can charge students for cross
registrations to different academic departments. This additional charge can be
added to the students’ tuition fee. Transfer price based on whichever is higher
between school enrolled and the course taken.
2. Do you see other problems with the introduction of profit centers? If so,
how would you deal with them?
One of the challenges of profit centers is process of addition

recordkeeping and paperwork. Profit centers generate revenue and incur
expenses, both of which should be carefully recorded and summarized in the
profit center’s income statement. The profit from these responsibility centers
are reflected as their performance. Proper control over the outputs of the
profit centers is crucial for the performance. If the university will accept the
proposal of profit centers, there will be extra work done for the departments,
which may be seen as undesirable or unnecessary by the faculty and other
staff.
Another challenge is the arguments of the profit centers on how the

charges are calculated. The university needs to oversee and ensure that the
coordination between departments runs smoothly through faculty meetings
and discussions.
The proposed method may lead to some students and faculty members to
be displeased due to the additional fees in tuition or the other fees in the
departments. The issues of the students and faculty can be raised through
suggestions and feedbacks, like open forums and faculty meetings. This way
the students and faculty can influence the head of the departments in their
decisions.
Some of the profit centers may not generate a profit but break-even or
even incur a loss. This is acceptable because as long as the total revenue
generated by all the departments can cover for the expense that they incur.
3. What are the alternatives to a profit center approach?
Piedmont University can have different means to resolve its financial

problems. Hugh Scott, the president of the university, can request a meeting
with the heads of the different departments of the school to discuss the two
main issues, the decreasing number of enrollments and the increase on the
costs. For the first issue, the University can establish different advertisements
and promotions of Piedmont so that in may attract new students. New
enrollments programs such as scholarships and other activities can help
attract new students too. For the second issue, the president and other
department heads can discuss the different costs of the departments and how
to allocate the annual budget to cover these costs. Piedmont can increase the
tuition fee or other charges on student to cover these costs. Although this
increase in fees may sway students away from enrolling, quality education
from a prestigious university like Piedmont should require such
compensation.
4. Assuming that most of the issues could be resolved to your

satisfaction, would you recommend that the profit center idea be
adopted, or is there an alternative that you would prefer?
The proposed method of treating the academic departments as profit

centers can be recommend if resolves the issues discussed and resolves the
two main issues the university is currently facing which are the decreasing
enrollment of students and increases in costs. If students are not still not
attracted to enroll to Piedmont and the university can’t generate enough
revenue to cover the costs, then an alternative method can be implemented.

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CONCEPCION, Alfredo Crisanto N.

August 27, 2022

MBA-1A – 83B – 1:00PM–4:00PM Prof. Ma. Lourdes Salazar

A Case Analysis on Piedmont University

1. How should each of the issues described above be resolved?

CENTRAL ADMINISTRATIVE COSTS

GIFTS AND ENDOWMENT

The revenue generated by the Piedmont’s athletic department is not

Substantial maintenance work at the request of the school in each

Piedmont University should start establishing a central IT department so

Currently, students enrolled at one school could take courses at another

One of the challenges of profit centers is process of addition

Another challenge is the arguments of the profit centers on how the

3. What are the alternatives to a profit center approach?

Piedmont University can have different means to resolve its financial

4. Assuming that most of the issues could be resolved to your

The proposed method of treating the academic departments as profit

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