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Question: Discuss About The Introduction To Management Accounting Price? Answer: Introducation Conventional method of allocating overheads lead to mispricing as under this system, the overhead is allocated based on only one factor that is the machine hours or the direct labour hours. To be more specific, the traditional approach imply entails that there is only one driver for allocating the overhead and that is the machine hours or the direct labour hours (Oseifuah 2014). However, practically there are various drivers related to the factory overheads, for instance, the machine set-up cost, inspection cost, special storage cost, special handling cost. More of the involvement of diversity with regard to the products and customer demands, more of the issues regarding the allocation of overhead. Further, under the traditional approach costs related to performance of all diverse activities are included under one cost pool and are divided by production machine hours and obviously the result is the 1 average rate that is used for all the products irrespective of diverse activities. T herefore, the allocation of overhead under conventional method leads to mispricing (Marx 2013). Advantages of activity based costing approach Improve the business processes under the ABC approach the indirect costs are allocated based on the cost driver of the product or based on the factors that generates the cost. As the costs are assigned as per the product, it can be identified by the management that which processes are profitable and which are not. The ABC system can further be used to recognize the activities that are non-value added and can assist in better allocation of the resources for profitable and efficient activities. Usage of ABC can add value to continuous enhancement of the business procedures (Ruiz-de-Arbulo-Lopez, Fortuny-Santos and Cuatrecasas-Arbs 2013). Recognize the wasteful products this system takes into consideration the costs that is similar to the production cost and allows the business to understand where the overhead costs are incurred. Further, the information can recognize the wasteful products and irrelevant costs so that the resources can be used efficiently. The ABC approach also assists in fixing the price of the service or products that are incorrect or excessive. Moreover, the quality of products or services can be improved as the issues can be resolved using the system (Monroy, Nasiri and Pelez 2014). Cost management the ABC system offers the rate of cost driver and the information on the volume of transactions that are useful for the management for managing the cost and appraisal of the performance under the responsibility centre. Further, the cost drivers are used advantageously for designing the existing as well as new products. Reference Marx, C., 2013. Activity based costing (ABC) and traditional costing systems. Monroy, C.R., Nasiri, A. and Pelez, M.., 2014. Activity Based Costing, Time-Driven Activity Based Costing and Lean Accounting: Differences among three accounting systems approach to manufacturing. InAnnals of Industrial Engineering 2012(pp. 11-17). Springer London. Oseifuah, E.K., 2014. Activity based costing (ABC) in the public sector: benefits and challenges.Problems and Perspectives in Management,12(4), pp.581-588. Ruiz-de-Arbulo-Lopez, P., Fortuny-Santos, J. and Cuatrecasas-Arbs, L., 2013. Lean manufacturing: costing the value stream.Industrial Management Data Systems,113(5), pp.647-668.