Uniform Costing


This is 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 similar manner so as to facilitate inter-firm comparison.

The objectives of uniform costing are:

  1. To promote uniformity of costing methods, so that valid costs comparisons can be made between similar organization
  2. To eliminate inefficiencies and promote good practice revealed by the cost comparison.
  3. Serve as a basis for government subsidies or grants which weed similar costing systems to ensure equitable distribution.
  4. Serve as a basis for competitive bidding.

Requirements of Uniform Costing

Uniform costing systems should process the following features:

  1. Cost statements and reports should be organized and laid out in a similar format so that each element of cost and revenue can be compared quite easily.
  2. Accounting periods must be the same in all firms in the industry.
  3. The methods of valuing stocks and work in progress must be the same.
  4. The basis of valuing fixed assets must be the same.
  5. The method and actual rates of depreciation for each type of asset must be the same.
  6. The basis of cost or overhead apportionment and absorption must be similar.
  7. Cost classification systems must be the same in all the firms in the industry so that similar items are classified in the same names.

Advantages of Uniform Costing

  1. It enables costs to be compared easily
  2. It makes it easier to computerize the accounting system of various organizations in the industry.
  3. It leads to easier cost transferability between organizations.

Disadvantages

  1. It may not be appropriate or suitable to an individual organization in the industry if there is a difference in size and structure.
  2. It is slow to adopt to changing conditions and demands.

Other Costing Methods

  1. Unit Costing
  2. Service Costing

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