Uniform Costing and Inter firm

comparison
By Ajinkya Chinchole
Roll no 84
TY Bcom
Div. A
 Table of contents
• 1)Uniform costing and inter firm comparison
Meaning
Objectives
Advantages and Disadvantages
Uniform cost manual
Interfirm comparison
 Meaning of Uniform costing
• CIMA (London) defines “Uniform costing is the use by several
undertakings of the same costing systems, i.e., the same basic
costing methods and superimposed principles and techniques”.
• In simple words it refers to the system which is uniformly
followed by many companies of the same industry in order to
benefit from comparison and competition.
• As defined by Prof. Glover, “It is a system of uniform application
of the principles of a costing method agreed upon and adopted
by the whole or majority of the manufacturers or executives in
any specific industry”.
 Objectives
• (i) To ensure that product prices are not arbitrarily fixed but on
reliable cost data,
• (ii) To provide reliable cost information to the Government and other
regulatory bodies for fixation product prices,
• (iii) To promote uniformity in costing methods and procedures for
valid cost comparison between different units of an industry or the
same organization,
• (iv) To enable each unit to measure its own efficiency in terms of the
industry’s standard and eliminate inefficiencies,
• (v) To serve as a basis of competitive but not destructive bidding,
• (vi) To effect improvement in labor and machine performance,
production methods and techniques,
 Advantages and Disadvantages

Advantages Disadvantages

Cost comparison Misleading conclusions

Easy transfer of staff Unreliable information
Easy training of staff Unscientific system
Easy transfer of equip Improper handling
Salary scales
 Uniform cost manual
• A uniform costing manual is a booklet that contains detailed
instructions to be followed by various firms in an industry in
connection with cost determination and control. It is a formal
document that lays down the recommended cost accounting
plans, policies, and other related matters, so that system can be
operated effectively.
• A typical uniform costing manual details the objectives and the
method of its administration and the procedure to be followed
for regular collection, analysis and reporting of cost data and
their interpretation to the member units.
 Interfirm comparison
• Meaning
• Inter-firm comparison is the technique that studies the
performances, efficiencies, costs, and profits of various concerns
in an industry with the help of the exchange of information in
order to have a relative comparison.
• It involves the process of bringing together a number of
identical firms and collecting their business figures and
statistics through a neutral organization in which the
participating firms repose their full confidence.
 Prerequisite
• Uniform costing
• Membership of Trade Associations
• Information to be Collected
• Procedure in Making Inter-firm
Comparisons
 Advantages of interfirm comparison
• It creates cost consciousness among the participating firms and
they are cautious in this respect at all levels of management.
• It helps the member firms to reduce their costs in case their
costs are more as compared to other firms.
• It stimulates self-criticism by comparing its data with the other
firms.
• It enables the firms to evaluate the data relating to the
operations of the competitors in order to analyze its weaknesses
as compared to other firms.
 Disadvantages of inter-firm comparison
• The top management may not be convinced of the utility of
inter-firm comparison because it is of the opinion that when
other tools of comparison are available, this tool has no utility.
• Mostly the member firms do not disclose the relevant data as
they think it to be confidential. Thus the information supplied
may not be reliable for comparison or decision-making
purposes.
• There may be no cost accounting system properly executed in
the concern. This will result in unreliable figures relating to the
various aspects of cost and there is the possibility of misleading
results if decisions are taken on the basis of these figures.
Thank You