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31QS(2)

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Financial & Managerial Accounting
Found in: Page 916
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Activity-based budgeting is a budget system based on expected activities.

(2) How does activity-based budgeting differ from traditional budgeting?

The difference between activity-based and traditional budgeting is described considering the three factors: meaning, encouragement, and targets/rewards.

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Step by Step Solution

Introduction

Activity-based and Traditional budgeting are the two types of budgeting methods that are inversely proportional to each other.

Difference

Basis

Activity-based budgeting

Traditional budgeting

Meaning

This type of budgeting method is based on the activities of the firm.

This budgeting method considers the previous year's budget while making the current budget.

Encouragement

Teamwork

Increasing management performance

Targets/rewards

No targets

Incremental targets

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