Direct labor cost

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Direct labor cost is a part of wage-bill or payroll that can be specifically and consistently assigned to or associated with the manufacture of a product, a particular work order, or provision of a service. Also, we can say it is the cost of the work done by those workers who actually make the product on the production line.

Determination of the direct labor cost[edit]

  • Planning the work to be performed.
  • Describing the job content of the work, by indicating the skill, knowledge, etc.
  • Matching the jobs with the employees.

Usage[edit]

The direct labor cost is part of the manufacturing cost.

Calculation of direct labor cost[edit]

In the direct labor cost we need to have the job time and wage we will pay it to the worker to calculate the direct labor cost as in this formulation:[1]-

\text{Direct labor cost} = \text{job time} \times \text{wage}

Wage[edit]

The wage is the payment rendered to the worker per hour as a compensation for the work done.

Calculating job time[edit]

The job time needs to be measured by one of the following ways:[2]

  1. time study
  2. work sampling

References[edit]

  1. ^ Ostwald, P. F., McLaren, T. S. Cost Analysis and Estimating for Engineering and Management, Prentice Hall, 2004, ISBN 978-0-13-142127-1
  2. ^ Kanawaty, G. Introduction to Work Study, International Labour Office, 1992, ISBN 978-92-2-107108-2