Which Industries/business concerns prefer to or are using Activity Based Budgeting?

really two sector can use ABB system and there are many benefits for each sector specially in decision making support .  

Activity-based budgeting is a planning system under which costs are associated with activities, and budgeted expenditures are then compiled based on the expected activity level. This approach is quite different from the more traditional budgeting system, where existing cost levels are adjusted for inflation and major revenue changes in order to derive the annual budget.

An activity-based budgeting system allows for a high degree of refinement in cost planning, and focuses attention on the volume and types of activities occurring within a business. A likely outcome of using this system is management planning to reduce the activity levels required to generate revenue, which in turn improves profits. It also means that managers are forced to have a detailed knowledge of company processes if they want to enhance the cost structure of a business.

Another advantage of the system is the strong link between it and the goals of the parent company. Ideally, management can use the system to see how much cost is associated with each part of a business, and then decides whether funds need to be allocated to or away from each area. This could result in a shift in funding to support parts of the business on which management wants to place a greater emphasis, such as on the development of new products or a product roll out in a new geographic region.

The downside of activity-based budgeting is the increased workload required to track activities, for which there may be no traditional tracking systems. Also, costs need to be traced back to activities, for which there may also be no systems in place. Consequently, setting up such a system can be difficult. An organization may find that this type of budgeting can be more easily rolled out on a pilot basis, perhaps by using it for a single department or profit center, and monitoring its impact on the budgeting process.

Advantages

The advantages of ABB are similar to those provided by activity-based costing (ABC).

• It draws attention to the costs of 'overhead activities' which can be a large proportion of total operating costs.
• It recognises that it is activities which drive costs. If we can control the causes (drivers) of costs, then costs should be better managed and understood.
• ABB can provide useful information in a total quality management (TQM) environment, by relating the cost of an activity to the level of service provided.

Disadvantages of ABB

• A considerable amount of time and effort might be needed to establish the key activities and their cost drivers.
• It may be difficult to identify clear individual responsibilities for activities.
• It could be argued that in the short-term many overhead costs are not controllable and do not vary directly with changes in the volume of activity for the cost driver. The only cost variances to report would be fixed overhead expenditure variances for each activity.

An activity-based budget can be constructed by preparing an activity matrix. This identifies the activities in each column, and the resources required to carry out the activities in each row.

The following 'activity matrix' shows the resources used (rows) and major functions/activities (columns) of a stores department. In this example, all the identified activities occur within a single department.

• The total current annual costs of each resource consumed by the department are shown in the final column; they have then been spread back over the various activities to establish the cost pools. The allocation of resource costs between activities will, to some extent, be subjective.
• Each of the first four activities has an identifiable cost driver, and the total resource cost driver rates can be determined (cost per unit of activity).
• The last two activities that occur within the department are non-volume related, and are sometimes referred to as 'sustaining costs'. They are necessary functions and should not be ignored in the budgeting process; however, they should not be attributed to particular cost drivers, as this would not reflect their true cost behaviour and would result in inappropriate budgets being set.

Activity cost matrix for stores department

Sustaining costs will effectively be treated as fixed costs. However, for control purposes, activity-based costs can be assumed to be variable, and actual costs can be compared with the expected costs for the given level of activity.

Thanks for invitation

I am apologies to answer this question because it's not my specialist field

@Mohammed Helal,  With all due respect you are discussing how helpful the Budgeting Method is but not telling where its being applied, there are many other uses to it, you must be aware of DPP which is based in ABC and ABB.Kindly let me know which of the industries its most appropriate to and if any is using it apart from one in New Zealand. real life application. The method is difficult and does require alot to work on, but i am interested in knowing which concerns are using it, because its really useful and offer solutions. 

agree with mr. m. helal

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I apologize for the answer I do not know, I leave the answer to experts specialists in this field that's not my specialty field