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ACCA Strategic Professional · Advanced Performance Management · Financial performance measurement

Eastbrook City Council budgets $9.0m for a youth training scheme aimed at placing 600 young people into jobs, a budgeted cost of $15,000 per placement. Actual spending was $8.4m and 480 people were placed. Council officers claim the scheme was successful because spending was $0.6m under budget. Which statement is correct?

Actual cost per placement was $8.4m divided by 480, or $17,500, against a budgeted $15,000. The $2,500 adverse difference shows poorer value for money. The total underspend arose from fewer placements, not from efficiency, so the officers' claim of success is misleading.

  1. AActual cost per placement was $17,500, which is $2,500 above budget, so the underspend hides poorer value for moneyCorrect
  2. BActual cost per placement was $14,000, so the scheme was more efficient than planned
  3. CActual cost per placement was $17,500, but this is acceptable because total spending was below budget
  4. DActual cost per placement was $15,000 because the budget was met in proportion

Explanation

Actual cost per placement is $8.4m/480 = $17,500 against budget $9.0m/600 = $15,000, an adverse $2,500 (16.7%). The underspend arose because fewer people were placed, not because of better efficiency. Using $8.4m/600 = $14,000 wrongly applies the planned output to actual cost.

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