Bcca s institue of management studies

INTRODUCTION TO COST ACCOUNTING FYBMS-B PROF. INCHARGE-ZAINAB RANGWALA

UNIFORM COSTING

Meaning

Uniform costing is not a separate method of costing like job costing or process costing . It is a system of cost accounting designed by an industry to be followed by all the firm in that industry .

Defination

The use by several undertakings of the same costing principles &/ or practices

Objects
Following are the objects of uniform costing vTo help comparison between different units of the industry . vTo fix common sale price . vTo make available better system for the units . vTo facilitate inter firm comparison . vTo eliminate unhealthy competition.

vTo encourage exchange of ideas among the different units . vTo improve production capacity & labour efficiency . vTo have a common policy for all the units in the industry . vTo maintain stability in demand . vTo ensure reasonable price to customer & profit to manufacturers .

Requisites of uniform costing

vThere should be a mutual trust , confidence & co - operation among all the member units . vLarge size organizations must help small sized organizations . vDeterminants of wages . vInterest on capital .

vDeterminants of cost of materials . vSystem of material control vValuation of stock . vThere should not be a sense of competition among the member units . vA uniform cost manual may be prepared for guidance of the member units . v v v v

Merits
vIt felicitates installation of an ideal costing system . vWeaker unit can improve efficiency by following standard methods . vCustomers believe in the price of goods . Relations with customers are improved .

vIt is a basis of inter firm comparison . vIt helps the government to take correct decision because of availability of reliable data . vIt eliminates cut throat competition & ensures stability in industry .

Demerits
vAll the firms in the industry may be rarely identical . vIt is costly to small units . vThe cost of installing of costing system is higher .

vThe standard terms may be misinterpreted by the member unit . vIt may lead to monopoly . vIt is difficult to decide common principles when the size & nature of business differs .

Inter firm comparison

Meaning

It is a technique by which the performances , efficiencies , costs & profits of the firms in an industry are studies by exchange of information & a relative comparison is made . It follows a uniform cost system .

Comparability of firm

In order to get the best result , from inter firm comparison , it is essential that the participating firms are comparable . They are engaged in the same industry.

Requirements of inter firm comparison

Following essentials points are to be considered while doing inter firm comparison scheme : vNature of information to be collected from the participating firms . vOrganization responsible for collection of information . vMethods of collection of data & its presentation .