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UNIFORM COSTING
Prepared by : Mrs. Agnes Sealy

INTRODUCTION TO UNIFORM COSTING

 Uniform costing is the application of the same accounting and costing principles,
methods or procedures uniformly by various undertakings in the same industry.

 When several undertakings start to use the same costing principles or practices,
they are said to be following uniform costing.

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 Different types of costing principles and practices are used by different

industries to suit their requirements. For comparison of the achievements,
costs, targets, profitability etc, within the firms, it is essential that the same
set of principles and practices be adopted by all the firms within the industry.

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 It is expected that in the case of a uniform costing system that all firms within
an industry include the same items in cost, apply similar methods of distribution
of overheads, adopt the same general classification of accounts, install similar
forms and procedures and present similar statements.

 For example , a number of sugar mills owned or managed by the same group may
adopt a uniform system.

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 The principles and methods of compilation, analysis, apportionment and

absorption of overheads differ from one concern to the other in the same
industry, but if a common or uniform pattern is adopted by all, it helps
mutually in cost control and cost reduction.

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OBJECTS OF UNIFORM COSTING

 It provides reliable data for making inter-unit comparisons of cost performances.

 It helps to arrive at the cost of production for the industry as a whole on a common
basis acceptable to all individual units or firms of the industry.

 It provides data to compare the cost of production and the production efficiencies
between one firm and others.

 It ensures that the product prices are based on authentic costing data.

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MAJOR OBJECTIVES OF UNIFORM COSTING

 Uniform costing can be introduced to achieve the following objectives:

 To Avoid Competition – it eliminates cut-throat competition by fixing common prices.
it also aims at bringing stability in the prices of products.

 Cost Comparison – it enables different firms to compare the costs because the cost is
based on the same principles. hence, profitability can also be compared.

 Measurement Of Efficiency – members can use it as a yardstick of their achievements

and performances.

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 To serve as a basis for government subsidies or grants which need similar

costing systems to ensure equitable distribution

 To serve as a basis for competitive but non destructive-bidding

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FEATURES OF UNIFORM COSTING SYSTEMS

 Cost statements and reports – should be organized and laid out in a similar
fashion so that each element of cost revenue can be compared easily

 Accounting periods – must be agreed on whether calendar months or 4 weeks

months will be used

 Cost classification – similar items will be classified in the same manner by all
concerned. This will avoid an item being classified by some as indirect and others
as direct.

 Valuation basis – agreed methods of valuing inventory and work in progress (WIP)
and of the methods of charging stores issue (will it be FIFO, LIFO or AVCO?)
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 Asset valuation – an agreed basis of non-current asset valuations (historical cost

or revaluation]

 Depreciation – an agreed method (reducing balance or straight line) and the rates
for each type of asset

 Costing principles and techniques - an agreed method of cost build-up and

whether marginal/absorption/standard costing or activity based costing will be
used.

 Bases of apportionment and absorption - an agreement of the way costs are

apportioned to cost centres and on the way overheads will be absorbed into the
products (units produced, labour hours, machine hours) 10

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ADVANTAGES OF UNIFORM COSTING

 Cost comparability – since similar principles, bases and valuation are used, genuine
cost comparisons can be made between different firms or organisations

 Professional expertise – systems are soundly developed to high professional

standards in a manner which would be too expensive for a single organization.

 Basis for data processing – it is easier to computerize the accounting system of the
various organisations.

 Staffing costs and staff flexibility – due to the similar nature of the costing systems
it may be possible to use lower grade staff in the separate organisations with
qualified, senior personnel at headquarters. This also allows for transferability
between organisations to be facilitated.

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 Reveals unprofitable products or profit lines and provides valuable

information to strengthen them.

 Creates confidence in the customers that prices have been fixed with
reliable data of costs

 Weaker member units can avail advantage of the efficient methods of

production, cost control and the research and development in the field

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DISADVANTAGES OF UNIFORM COSTING

 Inappropriateness to the individual organization - difference in the size of

the firm and the organisation structure

 Difference in technology

 Difference in range of products

 Difference in the level of productivity and efficiency

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 Difference in managerial planning and growth rates

 Difference in costing methods and principles

 Difference in geographical situations

 Inflexibility – like most centralized systems, it is slow to adapt to changing

conditions and demands upon it.

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APPLICATION OF UNIFORM COSTING

 PRINTING INDUSTRIES

 HOTELS

 DAIRY INDUSTRIES

 RETAIL AND WHOLESALE GROUPS WITH MULTIPLE OUTLETS

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SOURCE

 www.slideshare.com

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