To have an extensive background of managerial and financial accounting, several articles
published in various journal papers were reviewed and the text books available for this
topic, gratified greatly. The areas in which the articles were reviewed were: traditional cost
management (TCM) system, the break-even point and sensitivity analysis.
The traditional costing system is the allocation overhead costs of manufacturing to the
product is of manufactured using direct labor as the basis (Nagar, 2002). The variety and
complexity of product using a non-heterogeneous overhead rate today is not an appropriate
average .As a results, many manufacturing companies allocate the highest cost (overhead)
based on the lowest cost (direct labors) .The simplicity and consistency of the traditional
costing system give this kind of cost systems its strength over others (Chenhall, R.H., M.
Hall and D. Smith, 2010). The traditional costing system allocates overhead using a single
predetermined rate. Direct labor cost and machine hours are assume to be the relevant
activity based. The Traditional costing systems is uses causes and effect techniques and
considered direct and indirect costs and expenses in a business to predict profit (Cooper ,
2008). Direct and indirect costs allow business to estimate the total cost of manufacturing.
Costs of materials and cost of labor are considered to be direct costs whereas overhead
costs are considered to be indirect costs. The traditional costing system is relativity
straightforward and not expensive to operate. On the other hand, it can create a high
change in the amount of overhead applied in a factory with the small volume of resources
