1. Kaplan ('Relevance Regained', Management Accounting, September 1938) states the view that the 'time-honored traditions of cost accounting' are 'irrelevant, misleading and wrong'. Variance analysis, product costing and operational control are cited as examples of areas where information provided by management accountants along traditional lines could well fail to meet today`s needs of management in industry. You are required to (a) state what you consider to be the main requirements for effective operational control and product costing in modern industry; (b) identify which 'traditional cost accounting' methods in the areas quoted in (a) may be considered to be failing to supply the appropriate information to management, and explain why; ( (c) recommend changes to the traditional cost accounting' methods and information which would serve to meet the problems identied in (b).

2. A company is proposing the introduction of an activity-based costing system (ABC) 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