Que s tion f r om the A s sociation of Charte r ed Certified A cc ountants, Pi l ot P aper 2.4, Financial Management and Cont r ol.

a Discuss the conditions under which the introduction of ABC is likely to be most effec tive, paying particular attention to:

^● product mix

^● the significance of overheads and the ABC method of charging costs

^● the availability of information collection procedures and resources, and

^● other appropriate factors. (17 marks)

b Explain why ABC might lead to a more accurate assessment of management perform ance than absorption costing. (8 marks)

(Total marks = 25)