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

Under a uniform costing arrangement, three member firms treat depreciation differently: straight line, written down value and no depreciation on fully idle assets. The association wants comparable cost sheets. What should it do?

The association should prescribe a single depreciation method and a common basis for treating idle assets for every member. Uniform costing depends on consistent treatment of cost elements; differing methods or omitting depreciation would make cost sheets non-comparable.

  1. ALet each firm continue its method and compare only total profit
  2. BPrescribe one common depreciation method and a common basis for idle assetsCorrect
  3. CExclude depreciation from all cost sheets permanently
  4. DAsk only the largest firm to change its method

Explanation

Uniform costing needs common treatment of items like depreciation so that cost figures are comparable. Letting methods differ or excluding the item distorts comparison.

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