Final answer:
The claim that activity-based cost drivers result in zero-based budgeting is false. Activity-based costing and zero-based budgeting are two separate processes where the former allocates costs based on activities and the latter begins each budget period from a 'zero base'. The use of cost drivers in ABC does not inherently imply the use of ZBB.
Step-by-step explanation:
The statement that the use of activity-based cost drivers gives rise to zero-based budgeting is FALSE. Activity-based costing (ABC) is a method in cost accounting that identifies and assigns costs to overhead activities and then assigns those costs to products. ABC uses cost drivers to allocate these costs. On the other hand, zero-based budgeting (ZBB) is an approach to planning and decision-making which reverses the working process of traditional budgeting. In ZBB, budgeters review every program and expenditure at the beginning of each budget period, starting from a "zero base," without reference to prior justification. The use of activity-based cost drivers does not directly lead to the adoption of zero-based budgeting. Instead, cost drivers are merely used for more accurate cost allocation within the ABC system, which can be employed under various budgeting approaches, including traditional incremental budgeting. The budget constraint framework mentioned in the provided information hints that zero-based budgeting does not necessarily link to past decisions and implies that decisions should be made based on the current situation without the influence of sunk costs. This concept aligns with the ZBB method, where the budget is created anew without considering past budgets. However, it is important to distinguish between the budgeting process (ZBB) and cost accounting methods (ABC), which are separate financial management tools used for different purposes within an organization.