Which budgeting strategy requires justification starting from scratch each cycle?

The budgeting strategy that requires justification starting from scratch each cycle is zero-based budgeting. This approach mandates that every department must justify its budget requests from the ground up, rather than starting from the previous year’s budget or using historical data as a base. Each cost must be analyzed and justified for the new period, ensuring that all expenditures are considered based on current needs and priorities. This can lead to more efficient allocation of resources as it focuses on what is necessary for the upcoming budget period, rather than merely adjusting past budgets.

In contrast, top-down budgeting involves decisions made by higher management without input from lower levels, while bottom-up budgeting starts from the ground level where individual departments propose their budgets to be aggregated at the top. Activity-based costing is a method for assigning costs to products based on the resources they consume and does not pertain specifically to the format or approach of budgeting cycles.