Activity-Based Budgeting

Activity-based budgeting focuses on creating budgets based on the activities required for a task, unlike traditional budgeting which relies on historical costs. It aims to improve efficiency by identifying cost drivers and allocating resources accordingly. However, it is challenging to implement due to the need for detailed analysis of activities and cost drivers. Despite its potential for reducing waste, many companies find it easier to use historical data for budgeting.

In what ways can activity based budgeting lead to increased efficiency?

What challenges do companies face when implementing activity based budgeting?