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ACCA Strategic Professional · Advanced Performance Management · Performance optimisation in specific contexts

A government agency processes benefit claims. Last year: input cost $3,000,000, 60,000 claims processed, 54,000 of them correct and paid on time. This year: input cost $2,800,000, 70,000 claims processed, 56,000 correct and paid on time. Which statement is correct when comparing cost per correct, on-time claim?

Cost per correct, on-time claim improved from about $55.56 to $50.00. Dividing $3,000,000 by 54,000 and $2,800,000 by 56,000 gives these figures. So quality-adjusted efficiency improved, although the gain is smaller than the raw cost per claim suggests because more errors occurred this year.

  1. AIt improved from about $55.56 to $50.00, so efficiency measured on quality-adjusted output improvedCorrect
  2. BIt worsened from $50.00 to about $55.56 because the error count rose
  3. CIt is unchanged because total claims processed increased
  4. DIt improved from $50.00 to about $44.44 because only total claims count

Explanation

Last year: $3,000,000/54,000 = $55.56. This year: $2,800,000/56,000 = $50.00. Quality-adjusted unit cost fell, so efficiency improved. Using raw claims would give $50.00 to $40.00, which ignores the rise in errors (14,000 against 6,000) and overstates the gain. Option B reverses the years.

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