A company is proposing the introduction of an activity-based costing (ABC) system as a basis for much of its management accounting information.
(a) Briefly describe how ABC is different from a traditional absorption approach to costing and explain why it was developed.
(b) Discuss the advantages and limitations of this `approach based on activities’ for management accounting information in the context of
(i) preparing plans and budgets
(ii) monitoring and controlling operations
(iii) decision-making, for example, product deletion decisions.