ACCA Applied Knowledge · Management Accounting · Performance measurement - application
A public library service spent $480,000 on staff and materials last year. Which of the following is the best description of the 'economy' element of value for money?
Economy means obtaining inputs of suitable quality at the lowest reasonable cost. It is about spending less on resources, not about output per input, which is efficiency, or the achievement of objectives, which is effectiveness.
- AAcquiring inputs of appropriate quality at the lowest reasonable costCorrect
- BMaximising the number of books lent per member of staff
- CAchieving the stated objectives of the library service
- DIncreasing the number of registered members each year
Explanation
Economy concerns the cost of inputs: obtaining the right quality and quantity of resources at the lowest reasonable price. Books lent per member of staff relates to efficiency (outputs to inputs), while achieving objectives relates to effectiveness. Growth in membership is an output or outcome measure, not economy.
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