Direct labor cost

Direct labor cost

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 also it is the cost of the work done by those worker who actually make the product on the production line.

Contents

Determination of the direct labor cost

  • 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

The direct labor cost is part of the manufacturing cost.

Calculation of direct labor cost

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

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

The wage

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

Calculating job time

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

  1. time study
  2. work sampling


References

  1. ^ Ostwald, P. F., McLaren, T. S. Cost Analysis and Estimating for Engineering and Management, Prentice Hall, 2004, ISBN 9780131421271
  2. ^ Kanawaty, G. Introduction to Work Study, International Labour Office, 1992, ISBN 9789221071082

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