Uniform costing

logical embodyUniform terms is not a separate or distinct rule of fix up news report akin job priceing or process existing. It is only a establishment of terms accounting to be riding habitd by the instalments of the effort or address association. It involves adoption of same costing principles, practices and procedures by the exclusive members of the diligence for inter-firm comparison.The dodging is made operative through Trade Association or Chamber of barter or both(prenominal) other central agency. Its be idea is that whatever costing methods argon used, the same should be utilize uniformly by either the members of the manufacture. Before a uniform costing strategy is applied, it is utmost necessary to educate the members about the oomph of this constitution and its underlying principles. Uniform costing is not a new concept. It was foremost disclosed by the National Association of Stove Manufacturers of U.S.A. which developed a uniform formula for use by its members for costing perseverances products. Similarly, a uniform costing arranging of rules was adopted for printing industry in the United States. entirely 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 heavy scope of using uniform costing system in other industries too. CIMA defines uniform accounting as a system, using commons concepts, principles and quantity accounting practice, adopted by different entities in the same industry to facilitate inter-firm comparison.Application Of Uniform be System-Single family having a frame 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 atomic number 18 asserted in a uniform manner.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 requisite to maintain uniform costing records which are garterful in measuring the direct aptitude of its members. It ensures that cost entropy submitted by member companies are similar and consistent.Introduction of Uniform Costing helps the companies to submit reliable cost data to price fixing bodies, like Bureau of Industrial cost and Prices or other Govt. departments to determine the average cost and fixing the fair interchange prices of versatile products.Objectives Of Uniform Costing-To have a reliable cost data for inter-unit or inter-firm comparison of costs.To compare the operational efficiency of individualistic members against industrys overall performance of all member units.To fix a common interchange price for the indu stry as a whole on the basis of cost of takings of all member units.To reveal overseas telegrams of individual products which have been marketed on an unprofitable basis.To reveal lines of individual products which have been marketed on an improfitable basis.Member-companies adopt one best method of cost accounting system kn feature to the industry. This eliminates unsound method and saves costs required in perfecting systems through expensive experimentation.New companies piece of ass adopt it as a made system. Other companies can adopt the common system for improving their exist system.It develops a sense of awareness for production efficiencies within the industry for absolute costs.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 beget excess sales.It is beneficial to all the competing companies for filling tenders and quotations and consequently ill-effects of competition are avoided.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.It helps the Chambers of Commerce and Industry to leave their case to governing body on matters such as tariffs or export incentives.It encourages question and growing campaign at comparatively low cost to the member-companies. The benefits of research and knowledge carried out by considerable scale organized units can be shared by the small units.It enables the member-companies to receive the services of cost experts collectively with the minimum expenditure.It facilities the psychiatric hospital of uniform wage structure for the industry as a whole.It serves as a pre-requisite to cost audit and inter-firm comparison.The respective(a) member-units in an industry differ widely with regard to location, age, condition of plant and tip of mechanization. This differenc e is sometimes so wide that it does not permit efficacious use of uniform costing system.For smaller units, this system may not coextensive with the benefits derived.Uniform costing system may not commensurate with the benefits derived.The standard terminology used in the uniform costing system may not be understood properly by the member companies. However, this objective can be overcome by introduction of Uniform Costing.For Successful Application Of Uniform Costing System, The Following Conditions Must Be SatisfiedThe members of the trade association or Chamber of Commerce should cypher with a spirit of mutual trust and cooperation.Members should exchange their ideas freely, without fearing the leakage of secrecy.The closely-organised and big sector should be fain to pass on the technological improvements in the process/method of production to the other companies who unable to conduct their testify research and teaching activities.The companies must furnish full and corre ct culture to the Association so the efficiency of the members-companies can be compared.The members should not work with a sense of rivalry and jealousy.The term Uniform Cost conception covers activities such as cost accounting system, format for reports, digest of cost data, etc. Some of the activities which may be carried on partially or completely are as followsPublication of pages, speeches or discussions of important matters pertaining to costs in Trade Journals.Publication of educational literature pertaining to objectives of cost finding.Studies of position costing problems in the industry to develop sound principles.Activities of counseling constitution relaxing to establishment or operatives of cost accounting system.Development of estimating formulae or short-cut methods of establishing basis for pricing.Development and promotion of uniform cost programme.Cost studies in determining average or representative cost of products, functions or activities for universal r eading of members.Regular collections and dissemination of cost data under some kind of reporting plan.Complete analysis of cost data to try results to show trends, weakness of operation, etc.Whether cost data are required for one product or al the products produced in a factory.Costing techniques to be used, i.e, historical, standard or marginal.Definitions of various elements of cost such asv direct materialv direct labourv cost of direct servicesv factory overheads, administrative and selling overheads.Items which are extraneous to costs such as bad debts, donations, etc, and to be excluded from cost.Classification of production and service departments.Method of treatment of spoilage, defectives, etc, in costs. give-and-take of research and development in costs and methods of allocation of research and development to each cost centre/cost unit.Treatment of handling and terminus cost of raw materials.Method of pricing of materials used such as FIFO, LIFO, simple average, weighte d average.Production centres, cost centres, etc, to be used for analysis and comparison of costs.Methods of payment of remuneration.Treatment of items like interest on own capital, rent of premises owned, etcMethod of working out depreciation, i.e, whether straight line method or written down value method to be used.Method of apportionment of service departments costs to production departments.System of salmagundi and codification of cost accounts.Method of valuation of work in progress.The method of presentation of data and reporting to management.Treatment of under/over take up overhead, eg. Applying supplementary rate or write off to profit and privation account.For successful implementation of uniform costing system, it is the primary duty of a Trade Association of devise a cost manual containing recommended cost accounting plan. All the participant members should be invited for detailed discussion forward a cost manual is finalised. The cost manual is of immense help in gui ding the alive(p) firms to operate their accounts on uniform basis. If the industry consists of companies of similar size and a common range of products, it is entirely operable to present the accounting procedure in one manual for use of all members. Where, however, there is a great disparity in size of companies in an industry, it is better to issue a separate manual for large companies and one for the small.The Characteristics Of A Good Uniform Cost Manual ar Summarized Belowv It should present a strong case for the desirability of using uniform cost accounting methods.v It should serve as a comprehensive reference book on cost accounting procedures.v It should be useful to the executives/cost accountants for saving all problems in installation and execution of recommended uniform costing method.IntroductionStatement of objectives and inclination of the system.Education the management and people about the uniform costing systemScope of the system.Case for use of the system.O rganisationOrganisation for developing and in operation(p) the system.Stages in which the system is to be introduced.Management of the organisation by trade association or otherwise.Accounting SystemGeneral principles of accounting to be adopted.Terminology to be followed.Details of coding system.Classification and description of accounts. balancing between financial accounts and cost accounts.Accounting period.Method Of Costing E.G. mathematical process Costing, Job Costing, Standard Costing.Unit of production.Costing periods e.g. monthly, quarterly, half-yearly or annualExpenses to be considered in costs.Methods to be used for inter-unit transfer pricing.Classification of departments Production department, service department, etc. poppycock cost direct and indirect, treatment of idle time, treatment of fringe benefits, overtime, production bonus.Overhead-classification,collection, apportionment and allocation. Direct and indirect depreciation, method of depreciation to be used, research and development expenditure,methodofallocation/appotionment of service department cost to production department, capacity cost etc.Reporting.Periodically of reports.Levels for whom the repors are to be sent.Cost statements.Ratios -cost as well as financial.Supplementary data. Nature and extent of information to be pile upInter-firm comparison requires that all relevant and detailed cost information should be collected regarding business firm. No definite list of information can be suggested for collection. However, the following are the usual information which are applicable to all industries and therefore can be collected for the inter-firm comparison reading regarding cost and cost structure.Labour efficiency and labour utilisation.Machine efficiency and machine utilisation.Raw materials consumed wastage and stores-keeping.Return on capital employed.Liquidity and unruffled resources.Reserve and appropriation of internet.Debtors and creditors.Methods of production and technical aspects.Inventory and inventory systems. accountability for collection, coordination and presentation of informationIn some countries separate organisations have been realised for collecting and presenting information. in India inter-firm comparison information is collected by various trade associations, chambers of commerce, the national productivity council, research and statistics division of several(prenominal) commerce and trade journals and periodicals and newspapers. Method of collection and presentation of information entropy for the purpose of inter-firm comparison is usually supplied by business enterprises to organisation regularly. schooling can be collected by field workers also. After the information is collected, it is properly compiled and arranged and finally a consolidated report is prepared for the benefit of business firms. For the information to be purposeful, it is essential that act firms should hold about the meaning of various terms used in ra tios and accounting informationThe printing industry in UK has played a star role in the establishment of uniform costing system this industry was first to introduce the uniform costing system.This was a welcome metre for introduction of inter-firm comparison in the printing industry. The industry awas divided into various groups each having its own ratios base on differents characteristic of the firms. The division is based on the following characteristicsNature of activities carried in the printing industry, eg, genral printers , book printers,. newspapers houses, and size determined bu number of employees.It is to be pointed out here that actual go in sof profit or other details are not issued to members so that there is no betraying of confidence. Emphasis is always laid on word-painting the average results so that a single firm can make a comparison to see whether its own ratios are equal, better or worse than the average for its own particular group. For each ratio the m edian(prenominal) and upper and lower quartiles are computed. The confidential information ratios used by the principal industry in u.k are given.The benefits from inter-firm comparson include the advantages of uniform costing system and benefits arising out of the use ratios. The advantages of uniform costing system has been discussed before.The following additional advantages are obtained from inter firm comparisonThe extent of weakness of the participating firms is reaveled. Management is, therefore induced to take suitable remedial actions.The participating firms give information voluntarily and willingly in the prescribed questionare. The definations of various terms are clearly explained to the users. Thus the results obtained from the information are correct and capable of being compared.Inter- firm comparison promotes cost consciousness among the members of the industry.It enables the political science to take measures for effecting price regulation.It facilitates governme nt to grant protection to industries, wherever necessary.It introdues a sense of healthy competition among the participating firms.It provides substantial data to the members-firms to present their case to government.It forces self searching exercise among the members-firms.The benefits arising from inter-firm comparison have been sketch above. It is very good practice which promise substantial benefits to the members of the industry. The practical difficulties which are oftentimes experienced in the implementation of IFC scheme are summarized below.The member-firms often express resistance to the idea of disclosing data relating to the performance.Satisfaction with the present profits may bring about a sense of complaceny which is disastrous for progressive participation in the implementation of IFCWhen the companies do not follow suitable cost acconting system,the inter firm comparison will not be meaningful and effective.Non availability of suitable basis for comparison presen ts problem to the introduction of IFC. GOOGLE.COM YAHOO.COM COST ACCOUNTING BY JAWAHAR LAL COST ACCOUTING BY SULTAN SONS