Advantages And Disadvantages Of Activity Based Budgeting

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economic and efficient allocation of resources it takes to implement ZBB. Zimpapers uses incremental budgeting, assesses the budget from the previous years and modifies it upwards or downwards. (Mahler, 2016), says describes ZBB as a “straightforward, intuitively simple way to aggressively strip out costs that cannot be rationally justified.” ZBB results in more accountability and more detail making it unpopular with the work force. It helps with efficient resource allocation and excludes unproductive activities. It is however time consuming and requires a lot more manpower. ACTIVITY BASED BUDGETING Activity based budgeting evaluates the costs of each activity and this is recorded examined and its relationships with other activities is defined. Activity-based budgeting allows a company to refine its costs and focus attention on profitable activities in the company. It requires managers to have a thorough knowledge of the organisations processes. Managers need to have competency the skills to give an accurate activity analysis. ABB gives a more reliable method of projecting forthcoming costs (Kaplan & Atkinson, 1998). Managers can determine what cost is related with each part of the business. The company can then, determine which areas funds need to be relocated. This re-allocation of funding could go to supporting other areas of the business such new products or a new business unit. One of the disadvantages of ABB is that management has to spend significant amounts
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