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Hello Tutor,I have a question that is come from Specimen Exam applicable from September 2016 q6 MCQ Section A.
It says that ” Activity based budgeting takes into account the organization’s overall strategy during the budget process”which I don’t understand why Activity based budgeting will be taken into account of the corporate overall strategy while other budgeting don’t?
I hope Tutor can explain this part to me, very appreciate it.Thank you.Neither the question nor the answer says that other methods of budgeting don’t take into account the overall strategy – they may well take the strategy into account.
However it is asking with relation to flexible budgeting, which is simply budgeting fixed and variable costs separately to we can adjust for the actual levels of activity. It doesn’t in itself take strategy into account at all. Activity based does, because we are looking at how we intend to use each of the activities.
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