ACCA Applied Skills · Performance Management · Specific performance analysis issues in not-for-profit organisations and the public sector
A council library service spent $500,000 and lent 250,000 books. A budget allowed $480,000 for 240,000 books. The council wants a measure of economy. Which is the only measure of economy?
Economy is about obtaining resources at the lowest reasonable cost, so comparing actual spending of $500,000 with the budgeted $480,000 is the economy measure. Cost per book lent is efficiency, and books lent or resident usage relate to output and effectiveness.
- AActual spend compared with the cost of the resources budgeted, $500,000 against $480,000Correct
- BCost per book lent, $2.00 against $2.00
- CNumber of books lent against the target, 250,000 against 240,000
- DProportion of residents who use the library
Explanation
Economy concerns acquiring inputs at lowest cost, so comparing spend with the budgeted cost of inputs is relevant. Cost per book lent (both $2.00) is efficiency; books lent against target is an output measure; resident usage relates to effectiveness.
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