Management Accounting and Traditional System Appraisal

In reality, different drivers of factory overheads such as machine setups, special storage, unique inspections and special handling drive the cost. Thus, it is difficult to allocate cost to the diverse activities undertaken in meeting the diverse customer demands using a single activity of machine hours consumed.Similarly, containing all the costs incurred in undertaking the diverse activities in a single cost to allocate the costs by dividing with machine hours used in the production process is erroneous under the traditional system applied by the firm (Gediehn, 2010). The approach gives an average rate to be employed in the different products despite of the complexity and number of activities performed. This is a misleading approach to allocating the costs since the diverse customer specifications do not correlate (Gediehn, 2010). The use of a general average rate in allocating the overhead costs under the traditional management system misleads the management in determining the cost of the product per customer demand. The response that is derived from the results given under the traditional system has a high potential of being wrong due to the performance measures it generates (Bragg, 2013).Furthermore, the traditional system used by the firm has the potential of failing to motivate enviable behaviors. This is because it has the tendency of strengthening vertical controls and bureaucracy (Macintosh amp. Quattrone, 2009). The requirement for the staff to fill the time they spend in running the machine is a bureaucratic act that has the potential of attempting the staff members to inflate the hours to earn more salary. Thus, employees of the organization will not be motivated to act in the interest of the company. Similarly, the traditional system under use has the potential of causing the management to be disconnected from the strategic plan of the firm. This is because the managers will be obsessed inachieving the correct numbers that can cause the strategic purpose of the budgeting process to be missed.