Uniform Costing

1471 Words Dec 18th, 2012 6 Pages
Uniform Costing and Inter Firm Comparison

Uniform Costing is not a distinct method of costing. In fact, when several undertakings start using the same costing principles and/or practices they are said to be following uniform costing. The basic idea behind uniform costing is that the different concerns in an industry should adopt a common method of costing and apply uniformly the same principles and techniques for better cost comparison and common good. 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. Therefore
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11. Prices fixed on the basis of uniform costing are representative of the whole industry and thus are reliable.
12. Uniform costing provides a basis for the comparative assessment of the performance of two firms in the same industry but in different sectors.
13. It helps the Government in regulating the prices of essential commodities such as bread, sugar, cement, steel etc.
Limitations of Uniform Costing:
1. Sometimes it is not possible to adopt uniform standards, methods and procedures of costing in different firms due to differing circumstances in which they operate. Hence, the adoption of uniform costing becomes difficult in such firms.
2. Disclosure of cost information and other data is an essential requirement of a uniform costing system. Many firms do not wish to share such information with their competitors in the same industry.
3. Small firms in an industry believe that uniform costing system is only meant for big and medium size firms, because they cannot afford it.
4. It induces monopolistic trend in the business, due to which prices may be increased artificially and supplies withheld.

It is technique of evaluating the performance, efficiency, costs and profits of firms in an industry. It consists of voluntary exchange of information/data concerning costs, prices, profits, productivity and overall efficiency among firms engaged in similar type of operations for the purpose of…

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