Presentation on uniform costing Meaning of Uniform costing Features Objective Advantage and limitations of Uniform costing

2. It is neither a separate method of cost accounting like specific
order costing or operation costing nor a separate technique
of costing like marginal costing, standard costing but is only a
particular system of costing which takes the help of both
methods and techniques of costing.
The most important characteristic of uniform costing is that
whatever may be the method of ascertaining cost, 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.

3. CIMA, London Terminology defines 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.”

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

5. 1. Facilitates Comparison: To facilitate the Comparison
of Costs and performances of different units in the
same industry.
2. Eliminates Unhealthy Competition: To eliminate
unhealthy competition among different units of an
industry.
3. Improves Efficiency: To improve production capacity
level and labour efficiency by comparing the production
costs of different units with each other.
4. Provides Relevant Data: To provide relevant cost
information/ data to the government for fixing/
regulating prices of the products.

6. 5. Ensures Standardisation: To bring standardisation
and uniformity in the operation of participating units.
6. Reduces Cost: To reduce production, administration,
selling & distribution costs, and to exercise control on
fixed costs.

7. A successful style of Uniform Costing has the following
requirements:
1. The firms in the industry should be willing to share/
furnish relevant data/ information.
2. A spirit of cooperation and mutual trust should prevail
among the participating firms.
3. Mutual Exchange of ideas, methods used, special
achievements made, research & know- how etc should
be frequent.
4. Bigger firms should take the lead towards sharing their
experience & know-how with the smaller firms to
enable the latter to improve their performance.

8. 5. Uniformity must be established with regards to several
points before the introduction of uniform costing in an
industry. In fact, uniformity should be with regard to
following points:
a. Size of the various units covered by uniform costing.
b. Production Methods.
c. Accounting Methods & principles and procedures
used.

9. 1. Fixation of Common Price:
It avoids cut throat competition among the member units by fixing a common
price which is acceptable to all and thus helps in bringing stability of prices
of products. Moreover, selling prices of the products are fixed on the basis
of reliable data provided by member units using uniform costing. Prices
fixed will be acceptable to all and will result in better and cordial relations
between the member units.
2. Improving Performance:
Several common processes or operations can be standardized and made
applicable to several undertakings. It will help in improving the
performance of inefficient units.
It also enables the member units to use this system as yard-stick of their
achievements and performances by comparing costs and profitability of
such units. It helps that member units to exchange their ideas and
problems and to equip them with current trends and technology.

10. 3. Inter Unit Comparison of Cost of Production:
This is facilitated because a method of uniform costing is followed by several
undertakings
4. Control of Cost:
It facilitates in arriving at the cost of production for the industry as a whole
which is acceptable to several undertakings in the industry. It also helps to
control the cost by eliminating the unprofitable ventures and inefficiencies.
There will be better exchange of information among the member units
which ultimately leads to reduction in costs and improvement in the quality
of the products.
5. Helpful for General Control Over Member Units:
It enables the trade associations to have a general control over the member
units by way of regulating the production capacity, fixation of selling price
and so on.
6. Promoting Standardization:
It also helps to determine standardization in the method of production and
distribution.

11. 7. Helpful to the Government in Formulation of Policies and Giving
Subsidies:
It provides cost structure to the government to enable it to formulate policies
relating to wage structure, pricing, import and export and so on. It also
furnishes information to the government to get subsidy and other
concessions.

12. 1. Sometimes it is not possible to adopt uniform methods,
standards 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.

13. 4. It induces monopolistic tend in the business, due to
which prices may be increased artificially and supplies
withheld.

14. The system of uniform costing must be to meet the
needs of each individual case as there is no system
which may be applied in all circumstances. The
purpose of this system will determine the extent of
uniformity that should be achieved with respect to
various aspects of cost accounting.
If the common price is to be fixed under this system,
then member units may not be interested in
achieving unity in other respects. This may be
necessary if comparison of the performance of cost
centres is to be made.

15. Uniformity may be required on the following points by
the participating members:
a. The method and technique of costing to be followed.
b. Cost is to be ascertained from cost units or cost centres.
c. Definitions of the various elements of costs.
d. The basis for cost classification and codification.
e. Treatment of purchases, material handling and upkeep
expenses for the purpose of determining costs.
f. The system of material control.
i. The system of classification and codification of accounts.
j. Methods of remunerating the workers.

16. k. Methods of accounting of overtime pay, idle time, bonus
and other miscellaneous allowances paid to the
workers.
l. The identification of production and service departments.
m. The basis of allocation and apportionment and method
of absorption of factory overheads, administration,
selling and distribution overheads to the cost of sales.
n. The method of valuation of stock and work-in-progress.
o. The rates of depreciation to be used in case of fixed
assets.
p. Method of treatment of interest on capital and notional
rent of owned buildings.
q. Method of treating waste, scrap, spoilage and defectives
costs in cost accounting.

17. r. Treatment of research and development costs.
s. The method of treating under a: id over absorption of
overheads.
t. The method of recording accounting information. Integral
or non-integral system of costing to be followed.
u. Items to be excluded from the costs.
v. Reports and statements for planning and control.