Activity Based Budgeting (ABB)

Activity Based Budgeting (ABB) is the process of developing a master budget using information obtained from an Activity-Based Costing (ABC) analysis. This budget is more activity based instead of using the cost elements. Activity-based budgeting begins by looking at results and the activities that created them. The relationship of an organizations cost efficiency and activities performed in different areas of the organization, can be viewed through the activities that incurred cost in each function. This information is then used to decide how much resource should be allocated to each activity. ABB can also help firms create more accurate financial forecasts.