Activity-based budgeting, with its focus on cost drivers and the cost of activities, provides better decision-making information than budgeting based solely on output-based cost drivers (units produced, units sold, or revenues).

Question

Quizplus · Accepted Answer

Activity-based budgeting considers the cost drivers and the cost of activities, which provides more accurate information and insights for decision-making. In contrast, output-based budgeting focuses solely on production, sales, or revenue figures, which may not give a complete picture of costs or cost drivers. Therefore, activity-based budgeting is likely to be more effective in providing decision-making information.

Activity-Based Budgeting, with Its Focus on Cost Drivers and the Cost