A guide to cost studies in higher education is presented, with emphasis directed to the response of a four-year public institution to an externally mandated cost study. Cost studies are usually requested to guide budget allocations, either from an internal campus need or from outside pressures. Although much effort has been expended by various groups, and although accounting guidelines have been developed, no standard cost procedures or national norms exist. Basic considerations involved in cost studies include: direct and indirect costs, breaking costs down by field, allocating costs by level of instruction, relating costs per student credit hours to costs per student per quarter, and relating costs per student credit hours to the cost of degrees. Other items, such as whether to include vocational or continuing education courses and costs, will arise depending on the type of institution being studied and the purpose of the study. Variations in local accounting methods, administrative organization, and program emphasis preclude easy comparisons of costs among institutions. Some philosophical considerations often raised concerning cost studies are noted. It is concluded that with the pressures of inflation and changing enrollment, cost studies will continue to play an increasing role in administrative decisions. (SW)