Uniform costing is a financial practice that uses standardization to create comparisons cross an industry or among the branches of large business. Uniform costing insures that everyone uses the same methods report financials. The most common industry required uniform costing are public and industry that involves trade association or reserve federals subsidies. This system is based on the authorization of identical methods, principles that facilitate calculations. They are important for efficiency as well as proper, and relevant comparisons existing between companies .If the system would not been standardized, it would cause many complications regarding the analysis of overheads and other relevant issues.
Goals of Uniform costing
Relatively every innovative method serves to improve the system, to support its effectiveness and the development of individual fields. The most important aspects: Why using uniform costing, brings benefits:
- Firstly Facilitation of comparative combinations- Certainly, the main feature is to facilitate the comparison of performance costs that have different units in the same industry. It is an objective assessment
- It gets rid of unhealthy unfair competition- Unification of the system eliminates conflicts between individuals in the industry.
- It affects that the efficiency increase- The level of production capacity and work efficiency is compared to production costs of different units.
- The database is orderly-The Government to set the products’ prices needs reliable information on the cost of shares.
- Provides standardization-to ensure standardization and get rid of the diversity, in the effects of the participating units.
- It affects positively in reducing of costs-To decrease costs of distribution, selling, production, administration, and constant control of fixed costs.
Advantages of Uniform costing
The main advantage of costing systems is an achievement a higher level of operational efficiency through a consistent understanding of costs and competition. It results from the statement of costs of accepting real prices, relating to pricing policies, and establishing the best methods for creating cost calculations.Advantages of uniform costing is dissccused under different headings. These are the mains desirabilities:
- This system is based primarily on mutual communication, which leads to some calculations arise. This allows to overcome difficulties and implement its.
- Costs are controlled by the weaknesses and strengths of the enterprise. Comparison of data with other companies allows determining these features.
- Using experience resulting from other problems of different companies determines the achievement of optimal efficiency.
- The development in the industry of each company will be known resulting from a comparison of costs with other companies
- Every company can use the service of experienced experts and cost consultants to avoid failures. Also smaller companies will be having the chance to take advantage of the research, development and information about larger companies.
- The trade association will be supported in negotiations with the Government on topics such as tax concessions, subsidies, customs, and grants.
- Prices are reliable, because they are fixed on the basis of uniform costs. They are representative of the entire industry.
- Uniform costs are the bassist form for the comparing two companies, which are existing in the same industry but different sections.
Range of Uniform cost
The combination and stricter working arrangements between producer groups in different industries required some level of uniform costs by industries to some extent. Uniform costing can be advantageously used in an organization with many branches, each of which can be a separate production unit or in many units in the same industry related to each, other through a trade association or otherwise, or in similar industries, where they are in different states and have in common operations and procedures or companies with a certain number of bets and are subject to one ownership. In some companies, the operation of uniform costs is a subject controlled by the head office assessment, but in other cases companies from the same industry are associated with each other by a trade association to unify the cost system. It makes access to information easier for everyone, what is included in the cost and what should be done to achieve it. The need to establish uniform costs in enterprises connected with a standard data collection operation, the aim of which is to determine the cost of sales or the optimum accepted by everyone in the industry.
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- Advance Management Accounting, (Final Course Study Material), (chapter 9), (2011)
Author: Daria Maniak