Uniform costing means that system of costing under which many companies use the same method of costing to arrive at price of a product. This method has many advantages, given below are some of the advantages of uniform costing –
- First and foremost advantage of it is that it enables better comparison among various companies of a particular industry because if different companies in the same industry are using different costing methods than you cannot compare easily two companies. It is like comparing apple with orange if two companies are using 2 different method of costing.
- Since all companies know that all firms are calculating price on the basis of uniform costing than companies cannot fix unfair price for products as people from the same industry will know that price is artificially increased and therefore it is a big benefit for consumers as they are not exploited in the form of irrational pricing.
- It helps the companies in improving their efficiency because if a company in same industry can produce a product at cheaper rate than how can other firms lag behind and therefore it helps in improving overall efficiency of industry as a whole.
- Since labor problems is the core concern for majority of manufacturing companies, this method ensures that wages paid to workers is same across all firms of the industry which in turn results in labor not switching jobs from one company to another in lure of extra wages.
- Even government can fix polices easily because they know that any policy fixed by them will be adopted uniformly by all companies across the sector.
- Smaller firms can also benefit because they just have to follow what big companies in the industry are doing and therefore they do not have to spend too much time and money in setting costing system for their business.