We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is Activity-Based Planning?

Malcolm Tatum
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Activity-based planning (ABP) is a business planning strategy that focuses on identifying the types of activity that are needed to produce a desirable level of goods and services, with attention also paid to the type and amount of resources required to efficiently engage in those activities. Considered part of a larger process known as activity-based costing (ABC), the focus of ABP is to determine if the expenditure of resources to engage in those activities is in the best interest of the company. In addition, the nature of each activity is also evaluated closely, to make sure that the resources set aside are in fact being used to best effect.

With activity-based planning, the goal is to match the activities that the business undertakes with the amount of product that must be produced in order to satisfy consumer demands. Activity is typically used to identify such issues as the arrangement of a manufacturing floor, the specific tasks involved with the operation of each piece of machinery, and how goods in process move from one section of the floor to the next, ultimately resulting in a finished product. The goal with activity-based planning is to arrange that production process so that all resources devoted to the business effort are used in the most efficient manner.

By employing the concept of activity-based planning, business owners will look for ways to refine the production process so that the least amount of resources are expended in the production of goods and services, while still utilizing sufficient resources to produce high quality products. To this end, this may mean rearranging the production floor so there is less time lost moving goods in process from one machine to the next. Depending on how it affects production, this may involve adding or reducing the number of employees who work on those machines. The goal is to evaluate each action or step that takes place in the production process and minimize the waste of resources, so the average cost per unit produced is kept as low as possible.

When used to best advantage, activity-based planning helps to streamline a business operation, reduces operational costs, and prevents waste throughout the production process. At the same time, activity-based planning makes it possible to receive the greatest benefit from the use of labor and other resources, which means that more profit is made off each unit sold. With the right balance between costs and profits, the business is likely to remain in operation for many years to come.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.