Budgeting systems pt 2
- Created by: missamy11211
- Created on: 25-04-21 11:53
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- Budgeting systems pt 2
- Activity based budgeting (ABB)
- carried out to identify cost drivers within business functions. finds cost drivers (based on activity driving cost)
- e.g. a college will have classes as activity drivers, admin cost driver = no of orders handled
- Advantages
- more accurate
- focuses management attention on cost drivers - will control them more/easier
- more efficient improvement programmes as all of cost is known
- Disadvantages
- time consuming
- may not gain staff support as concept not as easily understood
- carried out to identify cost drivers within business functions. finds cost drivers (based on activity driving cost)
- Priority based budgeting
- modification of zero based budgeting (ZBB). (but does not requite £0 base). Costs are allocated to organisational priorities and allocates growth AND savings accordingly
- on going review of activities requires statement of:
- objectives/purpose
- targets trying to achieve
- levels activity can operate on
- based on this the activity will be classified as: essential, highly desirable, beneficial
- best combo chosen to match the budget, all activities reevaluated as budget is set
- e.g. police will have spent more on cyber crime than they would have 20 years ago
- on going review of activities requires statement of:
- modification of zero based budgeting (ZBB). (but does not requite £0 base). Costs are allocated to organisational priorities and allocates growth AND savings accordingly
- Activity based budgeting (ABB)
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