What is Activity-Based Budgeting?

Activity-based budgeting is a type of financial budgeting that is commonly used in many companies today. Here are the basics of activity-based budgeting and how it works.

Activity-Based Budgeting

Activity-based budgeting is a type of budgeting that works differently from the traditional form of cost-based budgeting. With this form of budgeting, companies are taking a look at the activities that are performed by the company instead of merely looking at the costs. They will be able to assign a specific cost or value to each activity that they engage in. By doing this, they will be able to get a more accurate picture of what is going on in their business.


Many companies now prefer this method over other budgeting methods that are currently available. By doing this, those that come up with the budgets can determine what amount of profit can be generated from every single activity. By doing this, they will be able to streamline their processes and become more efficient. The company will then be able to focus on the activities that are considered to be profitable and phase out those activities that do not generate as much profit or cost the company money.

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