ACCA Performance Management (F5) Certification Practice Exam

What is an economy element in performance management?

1. An output measure of efficiency

2. An input measure seeking the cheapest quality

3. A method for assessing profitability

4. A metric for employee performance

The correct answer is: An input measure seeking the cheapest quality

An economy element in performance management refers specifically to an approach that focuses on utilizing inputs most effectively to minimize costs while maintaining a required level of quality. This is especially important in resource management, where organizations aim to achieve the best possible outcome with the least expenditure. By concentrating on obtaining the cheapest quality of inputs, organizations can enhance their operational efficiency and effectiveness. This aspect is crucial for achieving cost leadership in competitive markets, allowing firms to maximize their profitability while ensuring that they meet standards and customer expectations. While other aspects such as efficiency measures, profitability assessments, and employee performance metrics are essential components of performance management, they primarily focus on different outcomes rather than the input cost aspect that defines the economy element. The economy element distinctly emphasizes the importance of cost minimization in the input phase, which sets it apart from metrics assessing outputs, profitability, or employee contributions.