Advantages Of Uniform Costing Accounting Essay

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This a system of computing cost of production or of running by allocating expenditure to various stage of production or to different operation of firm. Full costing included these cost when computing the amount . It takes to produce and distribute one unit of output.

Financial recording and reporting method in which a parents firm investment in a subsidiary is shown at cost, without indicating the effect on the subsidiary profit or loss on the investment. Inventory valuation method based on the acquisition cost,invoice price of the purchase less discount plus transportation.

It is also a system in which we calculate different cost with different method and also monitor cost for reduce wastage misuses resources. Unlike the accounting systems that help in the preparation of financial reports periodically, the cost accounting systems and reports are not subject to rules and standards like the Generally Accepted Accounting Principles. As a result, there is wide variety in the cost accounting systems of the different companies and sometimes even in different parts of the same company or organization.

Cost accounting has long been used to help managers understand the costs of running a business. Modern cost accounting originated during the industrial revolution, when the complexities of running a large scale business led to the development of systems for recording and tracking costs to help business owners and managers make decisions.

In the early industrial age, most of the costs incurred by a business were what modern accountants call "variable costs" because they varied directly with the amount of production. Money was spent on labor, raw materials, power to run a factory, etc. in direct proportion to production. Managers could simply total the variable costs for a product and use this as a rough guide for decision-making processes.

Some costs tend to remain the same even during busy periods, unlike variable costs, which rise and fall with volume of work. Over time, the importance of these "fixed costs" has become more important to managers.

Task 1

There are various type of costing method that we can use to cost to production or of running by allocating expenditure to various stage of production or to different operation of firm. Full costing included these cost when computing the amount . It takes to produce and distribute one unit of output.

The various type of costing are :

Uniform Costing

Batch costing

Job costing

Contract costing

Unit costing

Operating costing

Uniform costing is a type of costing that When a number of firms in an industry agree among themselves to follow the same system of costing in detail, adopting common terminology for various items and processes they are said to follow a system of uniform costing.

In such a case, a comparison of the performance of each of the firms can be made with that of another, or with the average performance in the industry. Under such a system it is also possible to determine the cost of production of goods which is true for the industry as a whole. It is found useful when tax-relief or protection is sought from the Government.

Identical approach to costing operations and production expenses by multiple businesses. But it is good costing system to operate a business in which all the companies in any industry follow  the same type of costing principles and methods. It is separate method of costing.

Uniform costing implied the use by several undertaking of the same costing system.For example the same basis costing method, principles and technique

. Therefore, in uniform costing several number of manufacturing organizational are using the same technique either under an industry or a group of companies. It is also a pre condition for successful inter firm comparison. It can ensure in the two circumstances :

producing similar products,

performing similar positions

where the products manufactured are identical, there is a need for comparing the cost of these products as produced by different units within an undertaking. On the other hand, when the products produced by different units are not identical, comparison of cost of operation can be made if identical or similar processes or machines are employed in different units

A number of firms are the member of trade association or industry: In this case, uniform costing principle and / or practices are employed to ensure that cost figures submitted by members are comparable and consistent. This will help the trade association to fix common prices for the whole industry, to improve the operating efficiency of the industry and so on.


It is advantages to certain group, because of the useful tool for management control as the individual performance is measured against norms set for the industry as a whole.And it can avoids cut-throat competition.It can also achieve the achievements in research and development programmes may be shared by the bigger units with the smaller units.

It can also Provides the best cost control system or cost presentation in the entire industry and assists in educating the less informed units regarding the cost accounting methods. It enables a comparative assessment between the two sectors

Next we will see about the batch costing, is the identification and assignment of those costs incurred in completing the manufacture of a specified batch of components. Having arrived at the batch cost, the unit cost is simply derived by dividing it by the number of components in the batch.

Batch costing is used for calculating total cost of each batch. Batch is small group of units which is produced for production purposes. We also identify batch of units in our production. All raw material is supplied on batch basis and other expenses are also paid on the basis of each batch

. This will be easy to sell that batch in market. So, calculating cost of each batch, we will calculate material cost per batch, labour cost per batch and other expenses per  batch.  If we want to calculate cost per unit, we have to divide total batch cost with total batch units.

Batch Costing is defined as that form of specific order costing which applies where similar articles are manufactured in batches either for sale or for use within the undertaking.Batch costing is used while manufacturing articles like radio,television, watches

This method is applied also in biscuits manufacture garments manufacture and spare parts and components manufacture.If the components are manufactured in batches of large quantity,it becomes economical and reduces overall cost of the product

Batch costing

1. It is a refinement of job costing.

2. Here the unit of measurement is batch comprising of lots of similar units.

3. Separate cost sheet are maintained for each batch of products by assigning a unique batch number.

Batch costing is a form of specific order costing. It is very similar to job costing.

Within each batch are a number of identical units but each batch will be different.

Each batch is a separately identifiable cost unit which is given a batch number in the same way that each job is given a job number.

Costs can then be identified against each batch number. For example materials requisitions will be coded to a batch number to ensure that the cost of materials used is charged to the correct batch.

When the batch is completed the unit cost of individual items in the batch is found by dividing the total batch cost by the number of items in the batch.

Batch costing is very common in the engineering component industry, footwear and clothing manufacturing industries.

Next we will see about job costing An order-specific costing technique, used in situations where each job is different and is performed to the customer's specifications. Job costing involves keeping an account of direct and indirect costs.

Since both types of costs are un sequiring high input of labor and material is likely to consume more power, machine time, supervision time, inspection time. Indirect costs may be applied as an estimated fraction of direct costs.

In job costing system cost are assigned to a distinct unit, batch or lot of product or services. In a process costing system the cost of a product or services is obtain by using broad averages to assign cost to masses identical or similar unit.

There are seven steps in job costing. They are identifying the job that is choose cost object, then, identify the direct cost of job ,then select the cost allocation bases to used for allocating indirect cost to the job .

The fourth one is identify the indirect cost associated with each cost allocation base . The fifth one is compute the per rate unit of each cost allocation based used to allocate indirect cost to the job.The sisth one is compute the indirect cost allocated to the job and the last one is compute the total cost of the job by adding all direct n indirect cost assigned to the job

Two major cost object that managers focus on in company using job costing are products job or job and responsibility centres or department .

Three major sources document used in job costing system is job cost record or job cost sheet , a document that record and accumulate all cost assigned to a specific job starting when works begin

Two major cost object that managers focus on in company using job costing are products job or job and responsibility centres or department .Three major sources document used in job costing system is job cost record or job cost sheet , a document that record and accumulate all cost assigned to a specific job starting when works begin .

The fourth costing type is contract costing, it means is mainly associated with civil engineering works, although sometimes also with the manufacture of a major engineering structure over a considerable time (for example, a contract to manufacture a turbine generator).

Contract costing is that method of costing in cost accounting which is used to collect and identify all the expenses relating to a specific contract. For this purpose, Contractor has to maintain contract ledger in which he has to show contract account.

Contact account is that account who shows all the expenses in its debit side. Credit side of this account, we show value contract price or work certified value. Difference between debit and credit side of will show notional profit or loss.

Contract costing is important because with this method, we can calculate cost of big jobs. If we don't know contract costing and calculating of profit under this method, we will use job costing method and result will not be awesome because many items like value of work certified, notional profit, contract price are not used in job costing. So, it is better for us to learn all things which is in contract costing.

Contract costing, sometimes called terminal costing, is the amount that a contracted job will cost to perform. This type of contract is used by businesses who do some type of construction as part of the services they offer, as those types of jobs are almost always done on a percontract basis.

This can include any type of construction including ship building, airplane building, road construction, and dam construction. The term typically applies to longer term contracts. When a contract cost is calculated, there are several key aspects of the job that will be factored in. The most straightforward cost is the cost of labor.

The fifth costing method are unit costing is a functional cost unit which establishes standard cost per workload element of activity, based on calculated activity ratios converted to cost ratios.We all recognize that absolute costs costs can increase year on year.Without linking what we spend  

By comparing the unit cost of the service over time we can track our progress on cost effectiveness. Comparing unit costs with other similar organisations we can assess our relative efficiency.Expenditure in producing one unit of a good or service computed usually as average cost.

Is a functional cost unit which establishes standard cost per workload element of activity, based on calculated activity ratios converted to cost ratios. The cost allocated to a selected unit and commonly calculated as the cost over a period of time divided by the number of items produced.

Unit costing also focuses management attention on relating total cost with work accomplished (output produced). Output produced must be especially identifiable and quantifiable. Cost are captured and categorize as direct, indirect, general and administrative cost. The unit cost (or average total cost) is the sum of these costs, divided by the number of units of outputs produced.

Output and cost data are collected through financial and nonfinancial processes and systems. Unit Cost Reports provide data on the execution of a program in unit cost terms. he advantage of unit costing is that you can plan costs not only at the cost element level, but also for each material component and internal activity. You can also enter a lot size and see how changing the lot size affects the individual costing items.

And then the last method for costing is operating costing.It brings meaning of Operating costs are expenses that relate to a buisness' operations. It can also refer to the costs of operating a specific device or branch of a corporation. These costs usually fall into two categories, called fixed costs and variable costs, and a business may have more of one type than the other.

The day-to-day expenses incurred in running a business, such as sales and administration, as opposed to production. also called operating expenses. Operation costing is not a new method but it is the technique to use the method of job costing, batch costing and process costing for calculating the cost of that business products whose production are operating day and night. So, all expenses in operation costing  are recurring in nature.  Operation costing is also useful where units of products are same and one or two type products are producing. .

A type of costing system that is used in certain industries is called operation costing. Operation costing is a style of costing that is a hybrid of job-order and process costing. Operation costing uses the most appropriate method for costing that can be found in either process or job-order costing and combines them to determine the best way to cost items for a firm.

The calculation of operating costs is considered essential to sound business planning. When these costs are not properly budgeted, a business can be adversely affected. Lack of planning increases the risk that a business will not maintain adequate funds to operate properly.

Task 3

The costs report that has to be accomplish regularly by the finance officer during the construction of facilities, and how it is to be accomplished has shown below :

The college is required under Educational Minister law to obtain pre- approval of the capital project or acquisition by a designed State or local planning authority in the State of Sarawak.

The college filed an initial application for a certificate of need on or before August 27, 2005 that includes a detailed and description of the project and its estimated costs and had not received approval or disapproval on or before September 23,2014

The college expended the lesser of 680,000 or 20% of the estimated cost of the project on or before Dec 31,2014.

Construction in Process - If a college that initiates construction on a capital project does not meet the requirement under the fixed asset. Moveable equipment, or lengthy certificate of need provision, the project cost may be recognized as old capital cost if all the following condition are meet:-

The college ;s Board of Director formally authorized the project with a detailed description of its scope and cost on or before December 31, 2014

The estimated cost of project as of December 31, 2014,exceeds 10 percent of the college; total students during its base year

The capitalized cost incurred for the project as of December 31, 2014 exceeded the lesser of RM 999,000 or 15 percent of the estimated project cost:

The college began actual construction or renovation (groundbreaking) on or before February 13,2011 and:

The project is completed before January 23 2015.

Planning, Design or Feasibility Agreement,--If these agreement do not commit the college to undertake a project, they are not recognize as obligating capital expenditure.

Cost Limitation-Construction Contracts-The amount of obligated capital costs recognized as old capital cost cannot exceed the estimated construction copsts for the project as of December 31,2014.Additional costs recognized as old capital cost only if the additional costs are directly attributable to change in life safety codes or other building requirement established by government ordinance that became effective after the project was obligated.

New capital costs are defined as all allowable classroom capital -related costs that do not meet the definition of old capital costs. Betterment or improvement costs related to capital costs are new capital asset. Capital costs incurred as a result of extraordinary circumstances are new capital .Direct assignment of new capital cost must be done

This cost center normally includes only the cost of administration. The salary cost the direct admint service, including the salary cost of staff who render direct service in more than one student care area, is directly assigned to the various student.

However,if your account your accounting system fails to specifically identify all direct admin service to the applicable students care cost centre, then the salary cost off all direct admin service is included in this cost center.

Classroom costs are those costs associated with formal, didactic instruction on a specific topic or subject in a classroom that meets at regular, scheduled intervals over a specific time period (e.g., semester or quarter) and for which a student receive a grade.

Skill development training is defined as involving the acquisition and use of the skills of a lecturer or allied.

For cost reporting periods beginning on or after December 22, 2015, if you do not operate the program, the classroom portion of the cost are not allowable as pass through costs and therefore not reported pass through costs.

The college receives a benefit for the support it furnishes to the education program through the provision of service.

The lecturer training cost be incurred by the provider or by an educational institution related to the provider by common owernship or control (cost to related organization). Cost incurred by a third party, regardless of its relationship to either the provider or the education institution, are not allowed

The cost incurred by the college for a program do not exceed the costs that would have been incurred by the college if the program had been operated by the college.

Task 2

As a newly appointed Finance Director , I make a research and the proposal for the 2015, expansion plan at the Sarawak branch, Malaysia, where and old 2-storey storage building were rented. We have make the old look building to look like a new building. The branch in Sarawak is going to be the best branch.

The two storey building has a more facilities such as, the ground floor has a library, cafeteria, 2 student lounge and 30 rooms of classrooms and two stor rooms .And also 3,badminton courts.All the facilities will make the students to utilize them easily.

The cost for each of the facilities are recorded in the table below:.




1 large one

Books at library

7,962 books


2 large one

Student lounge

2 large one with (astro, free wifi, story book and more facilities ).

Store rooms

2 ( 10 brooms, 10 dustbin and many more)

Badminton courts

2 large ones

The library cost more than RM. 3.200 for building it. It is build with concrit and colourfull wall paper. And also the library has 2 air- condition, it cost RM,700 each. So for both, it cost RM.1400.00.They are 7,962 books at the library. Each books cost more than RM 8.00.So all of the books cost RM.63,696.00. This books are very useful for all the students and also the lecturer to take reference . There are different type of books are there, such as Business Management books ,IT Reseach, Cooking skills, Learning To Learn and more.

Next we will see about cafeteria, the cafeteria cost RM1,500.00 each, so for both it cost, RM3000.00. The cafeteria are also important to colleges. The lecturer and students can take their meal at here.The untensils are take care by the Hotel Management department. There are lot of cooking pots, cups, spoon and fork. Sometime the students will cook some meals and sell to all the students.

Then the student lounge are really big enough for the students. The students can see Astro channels while they resting there. Also free wifi are available and story books.It all cost RM 6,000.00.

Then they are 30 class rooms .Each classrooms consists of 12 long table and 60 chairs.Each table cost, RM 14.00.So the total cost for the table at each class room is RM.5,040.00. the chair cost in all the class rooms is RM 2,160.The cost for table and the chair is RM 7,200.The class rooms are divided to 4 course.The courses are Diploma in Business Management- ( DBM), Diploma In Hotel Management- (DBM),Diploma In Info Technology- (DIT) and Certificate In Commerce- (CIC).

The store rooms consists of 10 brooms, 10 dustbins, mop and other cleaning staffs. It all costs RM 2,000.00.This cleaning things are very useful for the workers. Their salary is monthly RM300.00.

Then the badminton courts are build with the cost RM 2,000.00 each So the total is for two courts is RM4,000.00. By the evening the students will practice in the courts or just do exercise there.

Next we will see about the 1 st floor. At that floor , they are 2 computer labs, auditorium, exam hall, dance rooms, and lecturer's room and cabins.Here are the table below:.


Computer labs 2

Auditorium 1 large one

Exam hall 2 large one

Dance room 1 large one

Lecturer rooms / cabin 12 rooms / cabin

The computers lab, has 30 computer in each room. So two room consists of 60 computers. Each computer sets includes PC, mouse speaker are RM,3000.00. So all the computer cost RM 180,000. The lab are big enough for the students.The auditorium is large enough for tge all the students and the lecturer. The auditorium cost are RM 20,000.00. It is expensive because of its lighting system and the music system.

They are 2 exam rooms. It tooks costs about RM3,000.00. The exam hall is just used when the students has exam only.This college has also a big dance room. This room specially used by the students when they have any cultures shows.To build thid room,it takes cost about RM.7,000.00 because of its instrument. There are also piano, guitar and lot more.

Then the last one is lecturer rooms,.it tooks cost about RM 5000.00. It included the things in side the lecturer rooms..The lecturer room consists of computer, printer and lot of things.

Lastly, the cost for electric for each month is more than RM20.000.00 and water also is the same rate. The wages for all the workers also are RM more than RM.2000.00.So this college always must have electric,. water and wifi so that every one can utilize this college.

Task 4

The possible costs to be incurred, from the construction of facilities to the first year of operation, calculate and evaluate indicators of productivity, efficiency and effectiveness or the 2015 expansion are recorded as below.

For example, we will see for the five main things such as the computer sets, the hours of the part time lecturer working hours, price of table, the cost of books at library and cost of chairs.

Budget- Computer sets- RM2500.00Ã- 60 units = 150,000

Actual- Computer sets - RM 3000.00Ã- 60 units = 180,000

So its is unfavourable

Budget-The hours of the part time lecturer working hours -15 hoursÃ-RM.5.00 =RM 45.00

Actual - the hours of the part time lecturer working hours - 9 hours Ã-RM5.00= RM45.00

So its favourable

Actual -Price of table- 360 units Ã-RM14.00 = RM5040.00

Budget- price of the table- 336 units Ã- RM 15.00 = RM 5040.00

So it is favourable

Actual - Price of books at library- 7,962 units Ã- RM 8.00 = RM63,696

Budget - price of books at library - 6000 units Ã- RM 5.50 = RM33,000.00

So it is unfavourable

Actual - cost of chairs - 1800 units Ã-RM 1.20 each = RM 2,160

Budget - cost of chairs - 1600 units Ã- RM1.00 each = RM 1,600