PM

The aim of activity-based budgeting (ABB) is to ensure that the amount ofresources availab
le accurately reflects the activities required by the sales demand volumes.By focusing on
the relationship between the level of resources availa and the activities required, ABB tr
ies to identify the resources which are under utilized and the resources which is shortage
.After identify the under utilized and shortage resources, the ABB can assist organization
to better match resources to sales requirements, eg:purchase more recourse or re-allocate
employees.ABB also aims to eliminate activities which not value-adding. This means ABB ha
s an inherent focus on increasing efficiency which incremental budgeting does not have.Ano
ther key principle of ABB is that organizations should control the causes of costs (cost d
rivers), rather than the costs themselves, this should help it to reduce the costs resulti
ng from those processes.