Mix the apples, 1 1/4 C sugar, cranberries, tapioca, cinnamon and water in a large saucepan. Let stand 5 minutes. Cook over medium heat, stirring constantly, until mixture comes to a full boil. Pour into a 2 quart (8 cups) baking dish. Dot with 2 tablespoons butter.
Mix flour, 2 tablespoons sugar, and baking powder in a large bowl. Cut in 1/4 cup butter until the mixture resembles cornmeal. Stir in the milk until a soft dough forms. Drop dough by tablespoonfuls onto the hot apple mixture.
Bake 30 minutes at 375 degrees F until the topping is golden brown. Serve warm with ice cream.