Skip to content

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

Four cement firms agree to share cost data under an inter-firm comparison scheme run by their trade association. Which step must the association complete first so that the comparison of their results is meaningful?

The association must first adopt a common cost accounting manual that defines cost heads, classification and valuation methods. Without uniform principles and practices, the figures reported by members are not comparable, so any inter-firm comparison of ratios would be misleading.

  1. APublish each firm's name along with its cost per tonne to all the public
  2. BAdopt a common cost accounting manual that defines cost heads, classification and valuation methods for all membersCorrect
  3. CAsk the largest firm to fix selling prices for all members
  4. DAsk each member to use its own depreciation and overhead absorption methods

Explanation

Inter-firm comparison is valid only when data are prepared on the same basis. A uniform costing manual standardises cost heads, treatment of overheads, depreciation and stock valuation. Letting members use their own methods makes the ratios non-comparable, and price fixing or public naming are not prerequisites.

Did you get it right without looking?

One question tells you little. A timed set on Uniform Costing and Inter-firm Comparison shows your real accuracy, how long you take and where you lose marks.

Practise Uniform Costing and Inter-firm ComparisonFree diagnostic mock

More Uniform Costing and Inter-firm Comparison questions