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ACCA Applied Knowledge · Management Accounting · Performance measurement - overview

A public health clinic spent $400,000 on 8,000 patient treatments. Of these, 6,000 patients recovered fully, which was the clinic's aim. The clinic's budget was $450,000 for 8,000 treatments. Which statement is correct?

Cost per treatment was $50 (400,000 divided by 8,000), which is $6.25 below the budgeted $56.25, and the recovery rate was 75% (6,000 divided by 8,000). Only the option stating all three of these facts is fully correct.

  1. ACost per treatment was $50, which is $6.25 above the budget per treatment
  2. BCost per treatment was $50, and cost per full recovery was $66.67
  3. CCost per treatment was $56.25 and the recovery rate was 75%
  4. DCost per treatment was $50 and the recovery rate was 75%, with cost per treatment $6.25 below budgetCorrect

Explanation

Actual cost per treatment is 400,000/8,000 = $50. Budget is 450,000/8,000 = $56.25, so actual is $6.25 below budget, which suggests good economy/efficiency. Recovery rate is 6,000/8,000 = 75%. Cost per recovery is 66.67, but the option pairing it with 'above budget' or the wrong costs is incorrect.

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