Because the Colleges of Applied Arts and Technology (CAATS) of Ontario are largely dependent on the Ontario Government for financial support, it is important to justify their level of expenditure, and prove that allotted public funds are effectively and efficiently managed. After a brief discussion of the existing resource allocation process in Ontario, this paper explores various formula financing systems. Cost plans used by various states in the United States for financing higher education are examined in detail. Traditionally, per student program costs are arrived at through an itemized examination of the budget or financial statement of the particular college. The financing formula system proposed for CAATS is based on an analytical process that focuses primarily on such variables as teaching methods, administrative policies, and institutional characteristics. The basic purpose of the study is to develop objective information regarding the cost of a range of reasonable program alternatives in different institutions. (AF)