ACCA Applied Skills · Financial Management · Financial and other objectives in not-for-profit organisations
A charity that runs a youth education programme is assessing its performance using the 'three Es' of value for money. It spent less than budgeted on teaching materials by buying the same quality at a lower price per unit. Which of the three Es does this outcome most directly demonstrate?
The outcome demonstrates economy. Economy means obtaining inputs of the required quality at the lowest possible cost, and buying identical-quality teaching materials at a lower unit price does exactly that. Efficiency and effectiveness concern output per input and meeting objectives respectively.
- AEconomyCorrect
- BEfficiency
- CEffectiveness
- DEquity
Explanation
Economy concerns acquiring inputs of appropriate quality at the lowest cost. Buying the same quality of materials at a lower unit price is economy. Efficiency relates inputs to outputs, and effectiveness relates outputs to achievement of objectives. Equity is not one of the three Es.
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