Cost analysis involves breaking down operating costs of a school district and allocating those costs to the appropriate unit of analysis so various comparisons can be made and used by school boards in making decisions about whether to continue certain programs or whether to close or consolidate school buildings. A cost analysis does not provide exact cost figures for any given unit of analysis, rather cost figures represent reasonable and best estimates derived from budget and expenditure information. It is estimated that 80-95 percent of a district's total budget can be isolated according to the selected unit of analysis. A cost analysis focuses on the input of schools as measured by dollars, without regard for school climate, quality of the teaching force, leadership of the school, or outputs of the educational process. To illustrate cost analysis methodology, a cost analysis process is applied to a rural situation in a midwestern state where the school board operates two high schools, located in separate communities about 15 miles apart. A functional budget is developed in traditional categories as the basis for cost allocation. Tables and charts illustrate findings of the analysis and the ways such analysis can be presented for decision making. (BRR)