Limitations of Uniform Costing

The system has several advantages, but it is also not free from certain drawbacks. These can be summarised as under:

1. Common principles and procedures: Uniform costing requires laying down of uniform principles and procedures. Since the individual circumstances of each concern varies to a great extent, bringing uniformity in procedures, practices, etc. poses serious problems.

2. Lack of trust and confidence: The member units particularly when independently managed may not have the feeling of mutual trust and confidence. Thus, the system may not operate successfully.

3. Non-disclosure of technical or cost information: The member-concerns usually do not provide total information regarding costs and technical procedures. Thus, the system may not prove to be a success.

4. Rigidity: Flexibility of approach is difficult to be maintained. The common prices fixed may not meet the requirements of all and sundry.

5. Monopoly: Member-units may fix up monopoly prices and thus exploit the consumers. Thus, in a bid to avoid cut-throat competition, cut-throat prices from the point of view of consumers may be charged.

6. High cost: A comparatively small concerns may find the system expensive since the system to be adopted by all member-units has to be uniform irrespective of their size.

7. Distortion of costs: Costs computed under uniform costing system may not give a correct picture in specified cases.

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