Preparing a Budget

Key Terms

Activity-based budgeting (ABB). A form of budgeting based on activity-based costing (ABC) that focuses on the cost of the activities involved in all functional areas of an organization.

Activity-based costing (ABC). A process by which managers identify the cost of resources, allocate these costs to activities, and then allocate the cost of activities to products.

Allocated costs. Non-production-related costs—such as rent, insurance, and administrative costs—that are allocated to individual units’ operating budgets based on that unit’s output.

Balanced scorecard. A method of translating an organization’s strategic mission into multiple and linked objectives, focusing on financial, customer, internal business, and innovation and learning ...