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In variance analysis (accounting) direct material total variance is the difference between the actual cost of actual number of units produced and its budgeted cost in terms of material. Direct material total variance can be divided into two components:
Let us assume that standard direct material cost of widget is as follows:
Let us assume further that during the given period, 100 widgets were manufactured, using 212 kg of unobtainium which cost $ 13,144.
Under those assumptions direct material total variance can be calculated as:
| 100 units should have cost (× $ 120 per unit) | € 12,000 | ||
| but did cost | € 13,144 | ||
| Direct material total variance | € 1,144 | (A) |
Direct material total variance can be reconciled to direct material price variance and direct material usage variance by:
| Direct material usage variance | € 720 | (A) | |
| Direct material price variance | € 424 | (A) | |
| Direct material total variance | € 1,144 | (A) |
See direct material usage variance#Example and direct material price variance#Example for computations of both components.
In fiction, engineering, and thought experiments, unobtainium is any hypothetical, fictional, or impossible material, but it can also mean a tangible but extremely rare, costly, or reasonably unobtainable material. Less commonly, it can refer to a device with desirable engineering properties for an application, but which are exceedingly difficult or impossible to achieve.
Cost accounting is defined as "a systematic set of procedures for recording and reporting measurements of the cost of manufacturing goods and performing services in the aggregate and in detail. It includes methods for recognizing, classifying, allocating, aggregating and reporting such costs and comparing them with standard costs." (IMA) Often considered a subset of managerial accounting, its end goal is to advise the management on how to optimize business practices and processes based on cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future.
In management accounting or managerial accounting, managers use the provisions of accounting information in order to better inform themselves before they decide matters within their organizations, which aids their management and performance of control functions.
Cost of goods sold (COGS) is the carrying value of goods sold during a particular period.
The break-even point (BEP) in economics, business—and specifically cost accounting—is the point at which total cost and total revenue are equal, i.e. "even". There is no net loss or gain, and one has "broken even", though opportunity costs have been paid and capital has received the risk-adjusted, expected return. In short, all costs that must be paid are paid, and there is neither profit or loss.
In economics, marginal cost is the change in the total cost that arises when the quantity produced is incremented by one unit; that is, it is the cost of producing one more unit of a good. Intuitively, marginal cost at each level of production includes the cost of any additional inputs required to produce the next unit. At each level of production and time period being considered, marginal costs include all costs that vary with the level of production, whereas other costs that do not vary with production are fixed and thus have no marginal cost. For example, the marginal cost of producing an automobile will generally include the costs of labor and parts needed for the additional automobile but not the fixed costs of the factory that have already been incurred. In practice, marginal analysis is segregated into short and long-run cases, so that, over the long run, all costs become marginal. Where there are economies of scale, prices set at marginal cost will fail to cover total costs, thus requiring a subsidy. Marginal cost pricing is not a matter of merely lowering the general level of prices with the aid of a subsidy; with or without subsidy it calls for a drastic restructuring of pricing practices, with opportunities for very substantial improvements in efficiency at critical points.
Variable costs are costs that change as the quantity of the good or service that a business produces changes. Variable costs are the sum of marginal costs over all units produced. They can also be considered normal costs. Fixed costs and variable costs make up the two components of total cost. Direct costs are costs that can easily be associated with a particular cost object. However, not all variable costs are direct costs. For example, variable manufacturing overhead costs are variable costs that are indirect costs, not direct costs. Variable costs are sometimes called unit-level costs as they vary with the number of units produced.
In budgeting, a variance is the difference between a budgeted, planned, or standard cost and the actual amount incurred/sold. Variances can be computed for both costs and revenues.
In variance analysis (accounting) direct material price variance is the difference between the standard cost and the actual cost for the actual quantity of material purchased. It is one of the two components of direct material total variance.
In variance analysis, direct material usage variance is the difference between the standard quantity of materials that should have been used for the number of units actually produced, and the actual quantity of materials used, valued at the standard cost per unit of material. It is one of the two components of direct material total variance.
Direct labour cost variance is the difference between the standard cost for actual production and the actual cost in production.
The defined daily dose (DDD) is a statistical measure of drug consumption, defined by the World Health Organization (WHO) Collaborating Centre for Drug Statistics Methodology. It is defined in combination with the ATC Code drug classification system for grouping related drugs. The DDD enables comparison of drug usage between different drugs in the same group or between different health care environments, or to look at trends in drug utilisation over time. The DDD is not to be confused with the therapeutic dose or prescribed daily dose (PDD), or recorded daily dose (RDD), and will often be different to the dose actually prescribed by a physician for an individual person.
Sales variance is the difference between actual sales and budget sales. It is used to measure the performance of a sales function, and/or analyze business results to better understand market conditions.
Job costing is accounting which tracks the costs and revenues by "job" and enables standardized reporting of profitability by job. For an accounting system to support job costing, it must allow job numbers to be assigned to individual items of expenses and revenues. A job can be defined to be a specific project done for one customer, or a single unit of product manufactured, or a batch of units of the same type that are produced together.
In materials management, ABC analysis is an inventory categorization technique. ABC analysis divides an inventory into three categories—"A items" with very tight control and accurate records, "B items" with less tightly controlled and good records, and "C items" with the simplest controls possible and minimal records.
A product's average price is the result of dividing the product's total sales revenue by the total units sold. When one product is sold in variants, such as bottle sizes, managers must define "comparable" units. Average prices can be calculated by weighting different unit selling prices by the percentage of unit sales (mix) for each product variant. If we use a standard, rather than an actual mix of sizes and product varieties, the result is price per statistical unit. Statistical units are also called equivalent units.
Cost–volume–profit (CVP), in managerial economics, is a form of cost accounting. It is a simplified model, useful for elementary instruction and for short-run decisions.
Direct materials cost the cost of direct materials which can be easily identified with the unit of production. For example, the cost of glass is a direct materials cost in light bulb manufacturing.
The profit model is the linear, deterministic algebraic model used implicitly by most cost accountants. Starting with, profit equals sales minus costs, it provides a structure for modeling cost elements such as materials, losses, multi-products, learning, depreciation etc. It provides a mutable conceptual base for spreadsheet modelers. This enables them to run deterministic simulations or 'what if' modelling to see the impact of price, cost or quantity changes on profitability.
Standard cost accounting is a traditional cost accounting method introduced in the 1920s, as an alternative for the traditional cost accounting method based on historical costs.