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. (8 marks)

(b) Discuss the advantages and limitations of this 'approach based on activities' for manage- ment accounting information in the context of: (i) preparing plans and budgets (ii) monitoring and controlling operations (iii) decision-making, for example, product deletion decisions. (12 marks)