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

Four tyre manufacturers in an industry association plan to adopt uniform costing. Which of the following is the main advantage that arises specifically because all member firms follow the same costing principles and formats?

The main advantage is that costs of different firms become comparable. Because all members use the same principles, methods and formats, differences in cost reflect real efficiency differences rather than accounting treatment, which makes inter-firm comparison meaningful. It does not equalise prices or profits.

  1. ACosts of different firms become comparable, so inter-firm comparison is meaningfulCorrect
  2. BEach firm's selling price is fixed identically by the association
  3. CEvery firm's profit becomes equal in a year
  4. DStatutory cost audit of each firm becomes unnecessary

Explanation

Uniform costing applies common principles, methods and formats across firms, so cost figures are prepared on the same basis and can be compared. It does not fix equal prices or profits, and it does not replace statutory audit requirements.

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