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CMA Final · Strategic Cost Management · Uniform Costing and Inter-firm Comparison

A trade association runs an inter-firm comparison scheme. Which of the following is an essential requirement for the scheme to work effectively?

An effective scheme needs firms to submit data on a uniform basis so figures are comparable, and the information must be treated confidentially so firms are willing to participate. Naming firms publicly, restricting participation or using different methods would undermine the comparison.

  1. AParticipating firms must supply data on a uniform basis and the information must be kept confidentialCorrect
  2. BEach firm's data must be published with its name for all competitors
  3. COnly the largest firm in the industry should participate
  4. DFirms should use different costing methods to reflect their strengths

Explanation

Inter-firm comparison needs data in a common format so ratios are comparable, and confidentiality so firms are willing to share. Publishing names, limiting participation to one firm or using differing methods defeats comparison.

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