How an activity basedbudget is preparedSolutionActivity base

How an activity based-budget is prepared?

Solution

Activity based Budgeting is a method by which budget are prepared to focus on each aspect of the cost incurred in each and every function area , to easily track the cost and efficiency of the concern area.

Activity based budgeting process can be calculated in 3 steps.

First, it’s require to identify the activities, to the cost driver which are responsible for incurring revenue or expenses.

Secondly, No. of unit for each activity to be ascertained, to use as a baseline for calculation.

Finally cost per activity is determined and multiplied against the activity level.