Final answer:
The statement is TRUE. Activity-based budgeting offers a more detailed view of the cost drivers within an organization, leading to more accurate decision-making compared to traditional output-based budgeting, which doesn't consider the detailed activities that consume resources.
Step-by-step explanation:
True or False: Activity-based budgeting provides better decision-making information than budgeting based solely on output-based cost drivers (units produced, units sold, or revenues).
The statement is TRUE. Activity-based budgeting (ABB) considers the detailed activities that incur costs, leading to more accurate and relevant information for decision-making processes. It involves looking at the various activities that drive costs within an organization rather than just the output volumes. ABB allows managers to understand the cost drivers behind each activity, thereby identifying opportunities for cost reduction and emphasizing areas of efficiency. This detailed approach to budgeting contrasts with traditional output-based budgeting, which might use broad cost drivers like units produced or sold, or revenues, which may not capture the underlying activities and processes that consume resources.
By utilizing cost/benefit analysis, where the costs and benefits of a decision are weighed against each other, decision-makers can get a clearer view of the value and impact of a potential change. This analysis takes into consideration marginal costs and marginal benefits, which are crucial in understanding the consequences of producing additional units or engaging in additional activities. Cost Benefit Analysis is a primary tool in making informed decisions, ensuring costs and benefits are appropriately balanced. In this context, ABB complements such strategic tools by offering enhanced insights for cost structures and benefits realization.