Research On The Improvement Of Cost Budget Based On Activity

With the development of the society and economy, the great changes of operating environment take place inside and outside of enterprise. On one hand, the science and technology develop and use widely, which the cost structure of product has substantive changed, so the conditional distribution of expense does not provide the exact cost information even distort it which lead to make false decisions. On the other hand, the diversification and individuation of demand give the chance and challenge to the company. Thus, it is inevitable trend to replace the conditional cost method by activity-based cost, and this method is accepted by many companies.At the same time, the enterprise continually deepen functions and scope of budget management in order to improve the ability of competition and withstand the changeful risk. The function of budget management develops into the operating system that have the functions such as planning, controlling, incentive system, etc. In order to make use of the activity-based cost management and solve the inconsistency between the budget management and the activity-based management, the new theory—Activity-Based Budget turn up.The activity-based budget, has been widespread accepted by the theories and practice as a scientific method, which is not only used to effectively link between the enterprise'strategy and budget, but help employee and employer understand, the business process, so building the perfect evaluation system which could combine the performance with budget. Activity-Based Budget is the system which make the enterprise'budget come true by the way of integrating the corporation goals into the related job.The conception and background of ABB were presented in this paper, and then ABB was compared with traditional budget on the basis of analyzing the limitation of traditional budget, which is gradually disadvantageous for modern enterprise because of its mere focus on aggregate financial result. On the other hand, ABB can provide detailed activity information for the operation management because it successfully integrates process, strategy with management.Finally, certain general problems about the application of ABB will be analyzed and explained by the way of example.