Activity-based Budget Based On The Value Chain

When development of the times made the shortcomings of the traditional budget revealed beyond doubt, activity-based budget, for its series of advantages, to a certain extent, improves the shortcomings of the traditional budget, but because of its theoretical and operational limitations, making it the transformation of the traditional budget, not thorough enough. Precisely the value chain has which activity management and activity-based costing theory do not have that of the advantages, so this paper, based on the value chain, researches to improve its shortcomings.In theory, Activity-based budget, distributing the cost among the different cost objects although the activities, is more accurate than the attention to the cost directly. But the end lays on that the budget for the cost. Based on the value chain, the goal of budget is the value-added. Activity-based budget based on the internal activity chain of the enterprise, which is an integral part of value chain budget. Therefore, activity-based budget based on the value chain has expanded the scope of the budget preparation.Activity-based budget concerns the single activity, and separates the inter-linkages among the activities. Actually the values of the activities are from their relations. The value chain stresses the relations among the activities, not only the analysis of a single activity cost, but also the analysis of the interaction of the binding modes of activities. Lastly, building the system of activity-based budget based on the value chain.In operation, it divided into activity-based budget making in the internal and external value chains, and value-added budget making. The paper forms the system of indexes of the activities.Activity-based budget in the external value chain in operation is divided into two parts: financing budget upstream and investment budget downstream is included in the financial budget and the value-added budget. And node activities as the parts of the external value chain make budget. In the other side, compared to the value chains of the competitors, the enterprise makes budget for the competitive advantage, which as a separate item in the budget tables. When making budget of the activities in the internal value chain, it is in accordance with activity-based budget method, taking the impact on the external value chain into account. The budget forms should include: the value-added of the external value chain are mainly of financing and investment; the value-added of internal value chain are the various value activities. Lastly, the paper arranges a case to show the operations above.