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

Four firms in the same industry plan to adopt uniform costing. Which of the following is the main precondition for the arrangement to give meaningful comparative cost data?

The key precondition is that all member firms follow the same cost classification, cost units and overhead absorption methods. Without common costing principles, the figures cannot be compared. Identical prices, equal size or listed status are not required for uniform costing to work.

  1. AEvery firm must use identical selling prices for its products
  2. BEvery firm must follow the same cost classification, cost-unit definitions and methods of overhead absorptionCorrect
  3. CEvery firm must have the same number of employees and the same plant capacity
  4. DEvery firm must be a public limited company listed on a stock exchange

Explanation

Uniform costing works only when member firms apply common principles and methods of costing, such as cost classification, cost units, and overhead treatment. Identical prices, size or listed status are not needed, and none of them ensures comparable cost data.

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