To assess the performance of a private or public sector company is the assess the value for money. The value for money method is the combination of three elements, economy, efficiency and effectiveness. Economy is the measure of link between input and output. It balances the cost and the quality of the organization assets. It focuses on key areas like direct cost of material, labour and overheads. Efficiency means if an organization have resources, e.g. if company is producing goods, how many times its using its machines and using up to full or what percentage of capacity. If it's working more than 70% or whatever was budgeted, its fulfill its required performance objectives or not. Either company is efficient in its processes and using its resource's to max of it input resources. Effectiveness on the other hand is achievement of goals and objectives. It is the direct comparison between actual input with the actual output. If a company measure its performance by comparing budgeted material and labour and actual material and labour variance is either favorable or adverse. In case of favorable mean organization is effectively getting its objectives and results in increase profit and better performance. On the other hand, if variances are adverse it means bad performance and it will result in decrease in profits and organization has not used its resources efficiently and effectively. Required: You are a cost & management accountant of a hospital and you are responsible for the performance of the hospital in terms of resource input and efficient use of resources by using the best processes and effectiveness in terms of achieving financial and non-financial goals and objectives. You are required to measure the performance of the hospital in terms of three factors explain above (economy, efficiency and effectiveness). (20 marks) To assess the performance of a private or public sector company is the assess the value for money. The value for money method is the combination of three elements, economy, efficiency and effectiveness. Economy is the measure of link between input and output. It balances the cost and the quality of the organization assets. It focuses on key areas like direct cost of material, labour and overheads. Efficiency means if an organization have resources, e.g. if company is producing goods, how many times its using its machines and using up to full or what percentage of capacity. If it's working more than 70% or whatever was budgeted, its fulfill its required performance objectives or not. Either company is efficient in its processes and using its resource's to max of it input resources. Effectiveness on the other hand is achievement of goals and objectives. It is the direct comparison between actual input with the actual output. If a company measure its performance by comparing budgeted material and labour and actual material and labour variance is either favorable or adverse. In case of favorable mean organization is effectively getting its objectives and results in increase profit and better performance. On the other hand, if variances are adverse it means bad performance and it will result in decrease in profits and organization has not used its resources efficiently and effectively. Required: You are a cost & management accountant of a hospital and you are responsible for the performance of the hospital in terms of resource input and efficient use of resources by using the best processes and effectiveness in terms of achieving financial and non-financial goals and objectives. You are required to measure the performance of the hospital in terms of three factors explain above (economy, efficiency and effectiveness). (20 marks)
