Continuation of Cost Accounting Terminologies: Continuing with D
Direct Labor Efficiency Variance Analysis – This is the measure of efficiency in harnessing man-hours employed in the production of a particular product in relation to the number of units generated. A standard labor time is deemed as reasonable to produce goods that are highly acceptable to consumers; hence any resulting direct labor variance will have to be analyzed not by the number of hours used for production but by the effects created by the variance.
Direct Labor Time Standards – This refers to the time budgeted or allotted as reasonable for each unit, i.e. a machine, a batch, a specific process, or a department, to perform and complete the processes involved for an output to be generated.
Direct Labor Variance – The difference between the actual hours employed for a particular production activity against the direct labor time standards established for that same production activity. Determining this variance will provide the variable for computing the rate of direct labor efficiency and its analysis.
Direct Material – The actual measure and cost of materials that directly enter the production processes of a particular product.
Direct Materials Price Standard – This is the established cost of material deemed as adequate to produce a single unit of the product for which the standard price is established. Determining the standard price of materials takes into consideration the costs incidental to its procurement, i.e. shipping, holding, allowances for quantity differentials, and the net discounts.
Direct Materials Price Variance – This refers to the difference between actual price of direct materials used for a product and the standard cost of direct materials set for the same product.
Direct Materials Price Variance Analysis – The factors that gave rise to the variance are analyzed by isolating the point of operations at which the deviation from standards begins to take place. In cases where deviations arise, the sources of data to support and explain the occurrence of the variances will come from the purchasing unit, the procedures employed, the suppliers, the quantity ordered and delivered, as well as the quality of the raw material. This is regardless if the variable derived is favorable or unfavorable.
Direct Materials Quantity – The actual measure of direct materials that enter into the production processes.
Direct Materials Quantity Variance – The difference between the actual quantity used and the standard quantity of material per unit of a specific product.
Direct Materials Quantity Standard –The amount or measure of materials established as adequate for the production of a particular product, which takes into consideration the wastes, rejects, errors, and similar inefficiencies that are considered as normal under regular conditions.
Direct Materials Yield Variance – The comparison between the standard costs quantified by the standard number of output as against the standard cost quantified by the actual number of output. The resulting difference is the variance in yield or the variance in the quantities of outputs produced.
Direct Costing Method -- Term used for cost allocation in a manufacturing concern, wherein services rendered to benefit another service department is not taken into consideration. Instead, the entire cost identified in each service department is directly allocated for absorption of the different production units, in proportion to the direct labor employed by each production processor. Although criticized, direct costing method is widely used because of its simplicity. This is also known as absorption costing and marginal costing method.
Disposition of Variances – Under the standard costing method, variances that are attributable to manufacturing performance shall be disposed by including them in the profit and loss summary. In which case, unfavorable variances will be recognized as loss while favorable variances shall be added to the gross revenue based on standard costs. In some cases, the dispositions of variances are imputed against the cost of goods sold.
Distributed Processing – This is the adherent concept for the process costing method, which largely depends on the procedure adopted, whether by absorption costing, in which both fixed costs and variable costs are taken into account, or marginal costing, in which only the variable costs are considered. See Process Costing Method, Absorption Method and Marginal Costing.
Distribution Cost – This refers to the cost incurred by the business from mobilizing its goods from different points of production through the point of consumption.
The next page contains cost accounting terminologies beginning with E-F.