What is characteristic of activity-based budgets?
A)They use the knowledge of cost behaviour to split the functional-based line items into fixed and variable components.
B)They start with output and then determine the resources necessary to create that output.
C)They rely on the use of functional-based line items.
D)They work in environments where the products are homogenous and the production process is simple.

Question

Quizplus · Accepted Answer

Activity-based budgets start with the output and then determine the resources necessary to create that output. This approach is in contrast to functional-based budgets, which rely on predetermined line items and historical spending patterns. Activity-based budgets are used in more complex production environments where the cost of producing different products or services can vary based on the resources required to produce them. They also use the knowledge of cost behavior to split the line items into fixed and variable components.

What Is Characteristic of Activity-Based Budgets