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Activity based budgeting

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Sayed Arif
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Activity based budgeting - December 10th, 2013

what is Activity based budgeting ?discuss Activity based budgeting in detail?
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Asad Khan
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Re: Activity based budgeting - December 10th, 2013

Activity based budgeting is in contrast to the traditional system in which costs are allocated to each of the inputs and then budgeted whereas in activity based budgeting, cost is allocated to each of the activities performed to produce the finished product.
The final product targets are then aligned to the company%u2019s strategic goals and accordingly the activities are budgeted for the same.
In a traditional system, there is a lot of debate on how the indirect costs be allocated to products.Activity based costing solves this by measuring the activities performed in order to make the final product and costs are allocated to each of the activities. The indirect costs are then allocated based on the usage of the respective activities to produce the product.
The activities used to allocate the costs are also referred to as %u201Ccost-base%u201D. This method converts more of the indirect costs into direct costs.

Example
Let%u2019s suppose that a factory produces 2 products A & B. Now, if A is a customized product which takes a lot of R&D, is produced very rarely and needs some special engineering while B is a product which is in continuous production with a large amount of machine hours.
Now, as per the traditional costing system Product B will be allocated most of the indirect cost due to the no. of machine hours while Product A might have cost more due to the special engineering etc. Activity based costing thus takes various activities to be the cost base and allocates costs accordingly.
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Re: Activity based budgeting - April 20th, 2016

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Originally Posted by sayed123 View Post
what is Activity based budgeting ?discuss Activity based budgeting in detail?
Hello friend,

Please check attachment for Notes on Activity-Based Budgeting, so please download and check it.
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File Type: pdf Notes on Activity-Based Budgeting.pdf (105.7 KB, 0 views)
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