27: Uniform costing 1. Topics covered in this chapter 2. Features of 3. Advantages 2. Uniform costing defined 1. Objectives of uniform costing ] ‘uniform costing and disadvantages. This can be defined as, ‘the use by several undertakings of the same costing systems ie, the same basic costing methods, principles and techniques’. Terminology. Gaiform costing systems do not, in general, contain novel or advanced features. Rather they ensure that there are cimilar costing foundations and reports in a number of organisations. Uniform costing may te employed by members of the same group, various loeal authorities, or members of the ane tove “faotan, Examples of the application of uniform costing systems include: the printing, hotel and day industries, retail and wholesale groups with multiple outlets ete, 3. Objectives ‘The major objectives of uniform costing are, 2. To promote uniformity of costing methods so that valid cost comparisons can be mado between organisations b. To serve as a basis for competitive but non destructive bidding. ©.’ To climinate inefficiencies and promote good practices revealed by the cost comparisons. 4G. To serve as a basis for government subsidies or grants which need similar costing systems to ensure equitable distribution. 4. Features of uniform costing systems There is no hard and fast rule which determines what is a uniform costing system. However, it would be generally accepted that systems which follow agreed guidelines in the areas given below would be elacecg as uniform systems, ‘8. Cost statements and reports, ‘These should be organised and laid out in a compared easily. b. Accounting periods. similar fashion so that each element of cost revenue can be ‘hare must be agreement on whether calendar months or 4 week months will be used. Invariably there will be a standard accounting calenda ©. Cost classification, An agreed classification system must be used so that similar items will be classified in the same manner by all concerned. This will avoid an item being classified by some as indirect and others as oer k, ‘There must be agreement of the methods of stores issues eg, will FIFO, LIFO ote be use e. Asset valuation, f valuing stocks and W.LP. and of the methods of charging These must be agreement on the basis for fixed asset valuations eg, pure historical cost or revaluation at agreed periods, f Depreciation, Both the method (reducing balance or straight line) and the actual rates for each type of assot must be agreed. jEEN ee | . 27: Unitorm costing & Costing principles and technique, Jane tote © Me Tl eronsinad okie miter of sok balls, wed sitet soared / absorption / standard costing er Activity Based Corto bo voce. A. Bases of apportionment and absorption, way con £728 et system (marginal, sbuorption) is agreed, then thore wil have tobe agreement on the ay costa are apportioned to cost ctsines aqon the any ovecien lt Wl ea ee products, For bo the baata op recA be absorbed on units of production, labour hours, machine hers Meee Cor and so scl ebpetioning service cots to progaction co centres? If AUC ie tied ena vena ‘and cost drivers will be used?" “Ost f2 Prodi 5. Advantages of uniform costing 8. Cost comparability. Zils fs the prime advantage, Because stmnilar principles, bases and valuations are used, genuine cost e comparisons can be made batween different Brmas or wgenisations b, Professional expertise. t Frequently uniform costing eyitems are designaa by consultants or senior, experienced accountants 6 gmloyed by an association. ta this way'tne yoton are soundly Sechoend a eames q Gfandards in a manner which would be too'exponsive for a single organtenticn, Particularly one ; operating on namall scale" "°% 6. Basi for data processing, " uniform costing systems make it easier to computerise the accounting system of the various prggnasations, Similar cost classifications and report layouts considerably reauce the sae programming effort required. ; &. Staffing costs and staff flesbiity, ; Because ofthe similar nature of the costing systems it may be possible to use lower grade staffin the Separate orgonisation with qualified, snier personnel at headjuartors,Alse ena ee organisations may be facilitated, os ° 6, Disadvantages of uniform costing 8. Inappropriateness to the indivicial organisation. Nero member of trade aapiation ute unifrm costing, tho chosen system may not suit every frm, particularly where there is a range of sizes and structures. Frequently a tailor made system would be b better for particular organisations: a b. Inflesibiity, j : : Uniform costing eystems, like mont centralised systems, are slow to adapt to changing conditions and demands upon them. ey : 7. Summary - 2 Unftorm costing ie tho uo by a numberof dering ofthe same costing methods, principles and y techniques. a The major objectives are to enable dh comparisons to be made, to sarve aa a basi for competitive 7 , aig od iin ni aa F Boe mao fenton of nore cv le snilar cov sttaments standard ezcouting periods, : agreed cost clasefications and valisttn BMG and agreed costing anchlee ed eee d. The major advantages are; genuine at comparability, high professional standards, possibly lower staff ante and greater staffintar soso p Possibly © The dleadvantages avo: posible Shopppriateness to particular organisations and yonibte 5 inleasblity in relation to changing cteumnstances " f