What Is Zero‑Based Budgeting? Zero‑Based Budgeting (ZBB) forces every department to start each budgeting cycle from a “zero” baseline. Unlike traditional budgeting, which simply adjusts the prior year’s numbers, ZBB requires managers to justify every line‑item as if it were a new expense. This discipline uncovers hidden costs, redirects funds to high‑impact projects, and aligns … Read more
What Is Activity‑Based Costing (ABC)? Activity‑Based Costing (ABC) assigns overhead and indirect costs to products and services based on the actual activities that drive those costs. Instead of using a single plant‑wide allocation base (such as machine‑hours), ABC creates multiple cost pools that are tied to specific activities – set‑up, order processing, customer support, etc. … Read more
Understanding Zero-Based Budgeting: A Practical Approach Most organizations develop their annual budgets based on last year’s figures, tweaking numbers slightly for the upcoming period. This traditional approach assumes that what worked before will continue to work, leading to incremental adjustments rather than strategic reevaluation. While this method is straightforward, it often results in complacency, limited … Read more