1.

Uniform costing

Uniform costing refers to a system of costing under which several undertakings use the same
costing principles or practices. CIMA mein has defined the term uniform costing as “A common
system using agreed concepts, principles and standard accounting practices adopted by different
entities in the same industry to ensure that they all deal with accounting information in a like
manner, the objective being to facilitate inter firm comparison”.

Uniform costing is neither a separate method of cost accounting like which we have operation
costing similar nor a separate technique of costing like marginal costing standard costing but it is
a particular system of costing which takes the help of both methods and techniques of costing.

Most important feature of uniform costing is that it is adopted uniformly in a number of

undertakings in the same industry or even in different industries this enables the member
undertakings to compile the cost and accounting data on a comparable basis which ultimately
may be useful and helpful to the management for taking crucial decisions.

Features of uniform costing

a) The same costing principles are applied by all member units for ascertaining the cost.
b) The cost statements and reports are prepared on a uniform basis.
c) The accounting period is common for all the member units.
d) All the members units adapt the same costing method techniques and systems for
collection ascertainment and control of cost.

Scope of Uniform costing

Uniform costing may be applied by an organisation having a number of branches, each of which
may be a separate manufacturing unit or in a number of units the same industry bound together
through a trade association or otherwise or industries which are similar like printing press hotels,
sugar, cement, plastic, cotton, gas, electricity, road transport undertakings of various states and
have common operations and procedures for a form having number of plants under same
ownership and control.

Need for uniform costing

The need for uniform costing arises from the fact that different units used different cost
procedures and principles for costing such differences arise because of the following points like
a) size of the business unit
b) nature of business
c) product differentiation objectives of uniform costing and so on.
Essentials prerequisite for success of uniform costing
A successful system of uniform costing requires the following essential requisites for its
installation.
a) The firm in the industry should be willing to share or furnish the relevant data and
information.
b) There should be a spirit of cooperation and mutual trust among the participating firms.
c) There should be frequent mutual exchange of ideas, methods used, special achievements,
research and know how etc.
d) The bigger firms should take the lead towards sharing the experiences and know-how
with the smaller forms to enable the latter to improve the performance.
e) Uniformity must be established with regards to the size of various units covered by
uniform costing production methods accounting methods and principles and procedures
used.

Advantages of uniform costing

a) The advantage of uniform costing is that it helps trade associations in negotiations with
the government for any assistance are concessions in the matters of taxation subsidies
duties and price determination.
b) It will facilitate the development or introduction of information systems.
c) Optimum achievement of efficiency may be attempted by utilising the experience of
other functions in the system.
d) unhealthy competition is divided among the forms in the same industry by framing
pricing policies and submitting tenders.
e) The management of an individual form or unit is safe from the exercise of developing
and introducing and individual costing system.
f) standing of form in the industry would be known by making a comparison of its cost data
with others.
g) It provides a basis for comparative assessment of the performance of two forms in the
same industry but in different sectors.
h) Price is fixed on the basis of uniform costing a representative of the phone industry.

limitations of uniform costing

a) The use of the system of costing may lead to monopolistic tendencies resulting in an
artificially raised higher prices.
b) small firms feel that the uniform costing system is meant only for large and medium size
forms and they cannot afford it.
c) Adoption of uniform costing systems requires various forms to disclose their cost and
other data. Some of the forms do not like to do this as they don't want to disclose their
financial information cost details due to different circumstances in which firms operate.
d) it is difficult to have uniform standards, methods and procedures of costing this renters
deduction of uniform costing difficult.
Inter firm comparison
It is a technique of evaluating the performance, efficiency, cost and profit of a firm in an
industry. It consists of voluntary exchange of information and data concerning cost price profit
productivity as well as overall efficiency among the firms engaged in a similar type of
operations. The basic purpose is improving the efficiency and indicating the weaknesses.
inter firm comparison indicates the efficiency of a production and selling, adequacy of profit,
weak spots in the organisation etc.

Prerequisites of inter firm comparison

following prerequisites should be considered while installing a system of inter firm comparison.
1. The centre for inter firm comparison for collection and analysis of data received from member
units for doing a comparative study and for this termination of the results of a study a central
body is necessary. This Central body can function on collection of data and information from its
members, dissemination of results to its members, undertaking research and development and
organising training programs and publishing magazines next.

2. Another requirement for the success of inter firm comparison is that the firms of different
sizes should become the member of centre interested with the trustees of carrying out inter firm
comparison next.

3. Nature of information to be collected from the centre should be information regarding cost and
cost structure, raw material consumption, stock of raw material, wastage of material, labour
efficiency level, utilisation, machine utilisation, machine efficiency, capital employed, return on
capital, liquidity of organisation creditors data sets.

Advantages of inter firm comparison

a) it encourages managerial efficiency in the organisation by pointing out the spots of
efficiency and brings stability in the cost structure and presentation of information.
b) It creates cost consciousness among the participating firms and they are cautious in this
respect at all the levels of Management.
c) It helps the member firms to reduce their cost in case their cost are more as compared to
other forms.
d) It increases productivity by locating the weaknesses and in-economies. Inter firm
comparison is a method of self analysis of business by Businessmen themselves.
e) It provides Useful information to the management of every member unit to make proper
decisions and enable the management to continue to review the operations and policies of
business as a whole or its divisions.
f) stimulates self-criticism by comparing its data with other firms.
 g) It enabled the firms to evaluate the data relating to the operation of the competitors in
order to analyse a weakness as compared to other firms.
h) The benefit of research is passed on to member units by the central organisation.
i) It ensures the standardization of the production process.
j) It helped the government regulatory agencies and researchers in getting useful data and
information to improve policies and conducting death studies and research.

Limitations of inter firm comparison

a) Top management feels that secrecy will be lost.
b) Middle management is usually not convinced with the utility of search a comparison.
c) Suitable basis of comparison may not be available.
d) In the absence of suitable cost accounting system figure supplied may not reliable for the
purpose of comparison