A. Activity-based budgeting is similar in concept to activity-based costing. Activities that drive the costs are identified, a budgeted level of activity for each of these drivers is determined based on a budgeted level of production, and budgeted amounts are developed based on the budgeted level of activity. This focuses on activities but not necessarily on improvement of performance.

B. Zero-based budgeting is a budgeting method in which the budget is prepared without any reference to, or use of, the current period's budget and the likely operating results for the current period. Zero based budgeting does not refer to or use current practices, but starts all over. The budget described here starts by looking at the current practices and then at ways to improve current practices and lower current costs.

C. Standard cost budgeting uses standard costs and a flexible budget that can be adjusted to reflect actual production. However, standard cost budgeting looks more at expected costs rather than improvement of activities and improvement of related costs.

D. Kaizen is a Japanese term for continuous improvement. When applied to the budgeting process, the philosophy of kaizen leads to expected continuous improvements in the production process. A budget developed on the kaizen philosophy will take into account these expected improvements.