ACCA Applied Skills · Financial Management · Financial and other objectives in not-for-profit organisations
A public sector school received $900,000 funding. It spent $850,000 on inputs, when a comparable school bought the same inputs for $800,000. Its 500 pupils achieved an average exam pass rate of 70%, against a target of 80%. Which statement is correct?
The school was neither economical nor effective. It paid $850,000 for inputs that cost a comparable school $800,000, so it lacked economy. Its 70% pass rate fell short of the 80% target, so it also lacked effectiveness.
- AThe school was economical and effective but not efficient
- BThe school was neither economical nor effective, based on the data givenCorrect
- CThe school was economical but not effective
- DThe school was effective but not economical
Explanation
Inputs cost $850,000 against $800,000 for the same inputs elsewhere, so the school was not economical. The pass rate of 70% is below the 80% target, so it was not effective. The option claiming economy ignores the higher input cost, and the option claiming effectiveness ignores the missed target.
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