Advantages of Uniform Costing
The use of uniform costing provides the following advantages to different sectors.
1. For members units
(a) Fixation of selling prices: Accumulation of cost data on sound principles helps in determining selling on a uniform basis to suit the requirements of all the participating firms.
(b) Healthy competition: Removal of rivalries and enmities inculcates a spirit of healthy competition.
(c) Improvement in efficiency: Areas of inefficiencies or Uneconomies are located out and thus efforts for improving efficiency can be made.
(d) Cost consciousness: The member-firms realize the importance of controlling costs. This feeling of cost consciousness brings reduction in costs.
(e) Benefit to weaker units: Those participants who do not have expert knowledge of products can gain it from others. Research and development division of large concerns provides useful information to small concerns.
(f) Management control: Cost comparison helps the management in knowing the points of their weaknesses and thus enables them to exercise better control over the operations of the business.
(g) Profitability measurement: Unprofitable ventures are disclosed, the levels below which the firm shall operate at a loss are known. Thus, uniform costing serves as an insurer of profits.
(h) Economy: The concerns can appoint a cost expert or consultant jointly and share such costs on a common basis. Thus, it economises the cost of obtaining expert’s advice about costs.
2. For parent organisation
If the member units are under a common control either through a holding company or through a trade association, the member units as well as the parent organisation are benefitted by uniform costing in the following ways:
(a) Representation easy: The association can present the problems of member-firms to the government in a better way when it has with it the data about costs of all the firms. It helps in obtaining grant or subsidy, import-export licence etc.
(b) Better sales: Sales in the home and foreign market can be promoted by making a joint effort at the association level.
3. For government
(a) Data availability: Costing data can easily be available to the Government through the trade association and the government can expeditiously decide the policy matters regarding granting of subsidy, import licence etc.
(b) Minimum wages: On the basis of cost and profit data the ‘minimum’ and ‘fair’ wages can be fixed by the government through minimum wages act or wage boards.
(c) Effective price control: The government can regulate prices and check the genuineness of the uniform prices fixed by the association. It can also implement control system, if necessary.
(d) Comparative assessment: The Government can compare the relative efficiency or otherwise of private and public sectors and take important policy decision in this regard.
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