Monday, 1 July 2013



 Uniform costing is not a separate or distinct method of cost accounting like job costing or process costing.  It is only a system of cost accounting to be used by the members of the industry or trade association.  It involves adoption of same costing principles, practices and procedures by the individual members of the industry for inter-firm comparison.The system is made operative through Trade Association or Chamber of Commerce or some other central agency.  Its underlying idea is that whatever costing methods are used, the same should be applied uniformly by all the members of the industry.  Before a uniform costing system is applied, it is utmost necessary to educate the members about the desirability of this system and its underlying principles.  Uniform costing is not a new concept.  It was first introduced by the National Association of Stove Manufacturers of U.S.A. which developed a uniform formula for use by its members for costing industry’s products.  Similarly, a uniform costing system was adopted for printing industry in the United States.  But in U.K., British Federation of Master Printers was the first organisation to introduce a uniform costing system.  In India, it is being used in coal industry, steel industry and fertiliser industry.  There is a good scope of using uniform costing system in other industries too.  CIMA defines uniform accounting as “a system, using common concepts, principles and standard accounting practice, adopted by different entities in the same industry to facilitate inter-firm comparison.”
Application of Uniform Costing System:-

ü Single Company having a number of factories located at different places producing similar products or performing similar operations. For example, this system is being used by Associated Cement Company for its plants.  In this case, management prescribes a set of forms and procedures for the plant and all the records are maintained in a uniform manner.

ü A number of companies within the same industry.  Normally Trade Associations or Chambers of Commerce coordinates the function of uniform costing system.  Members of the association are required to maintain uniform costing records which are helpful in measuring the operating efficiency of its members.  It ensures that cost data submitted by member companies are comparable and consistent.

ü Introduction of Uniform Costing helps the companies to submit reliable cost data to price  fixing bodies, like Bureau of Industrial costs and Prices or other Govt. departments to determine the average cost and fixing the fair selling prices of various products.


         Objectives of Uniform Costing:-

ü To have a reliable cost data for inter-unit or inter-firm comparison of costs.

ü To compare the operational efficiency of individual members against industry’s overall performance of all member units.

ü To fix a common selling price for the industry as a whole on the basis of cost of production of all member units.

ü To reveal lines of individual products which have been marketed on an unprofitable basis.

ü To reveal lines of individual products which have been marketed on an improfitable basis.


ü Member-companies adopt one best method of cost accounting system known to the industry. This eliminates unsound method and saves costs required in perfecting systems through expensive experimentation.

ü New companies can adopt it as a ready-made system. Other companies can adopt the common system for improving their existing system.

ü It develops a sense of awareness for production efficiencies within the industry for controlling costs.

ü It provides standard guidelines for pricing of products and indicates how prices fixed below la certain level may be self-defeating even though it may bring additional sales.

ü It is beneficial to all the competing companies for filling tenders and quotations and consequently ill-effects of competition are avoided.

ü In case of ‘cost-plus’ contracts, uniform costing facilitates preparation of cost sheets on commonly accepted standard principles and practices. Thus, it helps early finalization of ‘cost plus’ claims.

ü It helps the Chambers of Commerce and Industry to present their case to Government on matters such as tariffs or export incentives.

ü It encourages research and development work at comparatively low cost to the member-companies. The benefits of research and development carried out by large scale organized units can be shared by the small units.

ü It enables the member-companies to receive the services of cost experts jointly with the minimum expenditure.

ü It facilities the introduction of uniform wage structure for the industry as a whole.

ü It serves as a pre-requisite to cost audit and inter-firm comparison.

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