UNIFORM COSTING

&
INTER FIRM
COMPARISION

Meaning
Meaning of Uniform Costing
When various entities start using same costing
principles then are said to be following uniform
costing.
Meaning of Inter Firm Comparison
It is technique of evaluating the performance,
efficiency, costs and profits of firms in an industry.
Comparison is possible where uniform costing is
applied.

Need and Objectives of Uniform Costing

The aim of uniform costing is to introduce inter
firm comparison, apart from it the following are
other objectives:
1. To bring standardization and uniformity in
operations.
2. To facilitate the comparison of costs and
performances.
3. To improve efficiency & effectiveness in
controlling costs.
4. To reduce various costs.
5. To provide relevant cost information to

Limitations in applying Uniform Costing

There are certain inherent limitation which makes
it difficult to apply uniform costing:
1. Diversity in operation and circumstances.
2. Hesitation in disclosing vital costs data.
3. Mind Set of small firms.
4. No willingness and lack of participation

Areas to be focused for applying

Uniform Costing
Following points needs to be established before
introducing uniform costing:
1. Willingness, sense of co-operation, mutual
exchange of ideas.
2. Bigger firms should take lead
3. Uniform costing depends on size of the
organization hence units of different sizes should
be categorized.
4. Uniformity in production methods.
5. Uniformity in principles, procedures and methods.

Uniform Cost Manual

Uniform Cost Manual is a written document, which may be in
form of booklet or bulletin, containing the principles, methods
and procedures for ascertainment of uniform costing.
A. Features
1. Includes objectives, advantages, principles
2. Essential cost data and computing ratios, reports etc.
3. Provide guidelines on accounting
B. Contents
1. Introduction
2. Accounting System
3. Cost Accounting System
4. Presentation of Information

Pre-requisites of Inter Firm Comparison

The following pre-requisites should be
considered while installing inter firm
comparison:
1. Centres for inter firm comparison
2. Membership
3. Nature of information to be collected
4. Methods to collect information
5. Presentation of information

Ratios for Inter Firm Comparison

Limitations of Inter Firm Comparison

The following are the limitations of inter firm
comparison:
1. Top management feels that secrecy will be lost.
2. Middle management is usually not convinced
with the utility of such a comparison.
3. In the absence of a suitable cost accounting
system, the figures supplied may not reliable for
the purpose of comparison.
4. Suitable basis of comparison may not be
available.