Activity based budgeting and beyond budgeting

Traditionally we measure the performance of the managers based on budgets prepared at the beginning of the period.

However, with beyond budgeting approach measures the performance of the managers based on comparing the performance of the managers with other similar companies (or similar divisions of the same company). The reason is that companies prefer this approach that measures the performance of the managers to compete with industry standards that help meet the customer’s perspective.

I have a question here that manager’s performance are compared with similar companies manager’s performance or similar companies’ budgets?

Please correct me what I have written above and I could not find activity-based budget in your lectures. Please do state what it is and why we should prefer it over other budgeting.

You didn’t say what I said above about beyond budgeting was correct or not?

You mean to say that beyond budgeting is an advanced technique without making any budget at all rather the comparison is with similar companies manager’s performance so we can say that the budget is actually the similar companies manager’s performance as a base to perform to this level. But how do we obtain similar companies manager’s performance so that we can compare our manager’s performance with it?

Activity based budgeting is a budgeting method in which budgets are prepared using Activity Based Costing after considering the overhead costs. In simple words, activity based budgeting is management accounting tool which does not consider the past year’s budget to arrive at current year’s budget. Instead, the activities that incur the cost are deeply analyzed and researched. Based on the outcome of the study, the resources are allocated to an activity.

It is concerned with the allocation of fixed costs (ie. overheads) which focuses on understanding how overheads are consumed by the production process.

Is that all correct? Thanks for your time I appreciate your help 🙂 🙂