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What is Activity-Based Budgeting?
ABB is a budgeting method that estimates the costs of individual activities in order to establish forecasts.
Does the ABB keeps the unnecesary process?
No, it removes the unnecesary process
What is a cost driver?
A cost driver is the direct cause of a cost and its effect is on the total cost incurred.
ABB function?
Register, analyses and makes a research of the activities that reflects a cost for the company.
Is the ABB quick to build?
No
How does the ABB process begins?
By identifying activities to make a product or service.
Is the ABB used to set cost targets, to make forecasts?
Yes
What will the poor understanding of the business's functional leads to?
Inaccuracy
What does the ABB examine first?
All activities that represent a cost.
What are the steps in the ABB process?
What does the ABB estimates?
The details of the costs required for each activity to produce a product or service.
Does it integrates the whole organization?
Yes, it does
What is meant by "activity" in Activity-Based Budget?
An activity is necessary for the production process; it is a step that enables the production and the sale of goods and services.
Objectives of the ABC?
Reduce costs as much as possible or eliminate unnecessary ones to make more profit.
True or false: The ABB is based on previous years.
False
What is the difference between ABB and ABC?
With ABC, we calculate the costs, with ABB, we forecast a budget.
In which sector did ABB first appear?
Industrial sector
What is the difference between ABB and Traditional Budget?
While a traditional budgeting method adjusts past costs for inflation, activity-based budgeting is a much more thorough way to look at costs.
True or false: Activity-Based Costing is about cost control.
True
What is the particularity of the ABB?
It is based in activities.
In a burger restaurant, what is considered as an activity for the ABB method?
A. Cooking
B. The veggie burger
C. The workforce
Cooking
Which sectors use the ABB?
All sectors
Is the ABB process expensive?
Yes
What is the main disadvantage of the ABB?
This takes time to develop and is complex to implement.
Who is most likely to implement the ABB?
- New businesses
- Firms undergoing material changes
- Firms that want to be more profitable