How Is Direct Labor Cost Calculated?
Quick Answer
The simplest method for calculating direct labor cost is represented by multiplying the total hours worked times the wage rate for the period of time in question. The equation looks like this: direct labor cost equals total labor hours times labor rate.
Continue Reading
Full Answer
Labor costs are segregated in two categories: direct labor costs and indirect labor costs. Direct labor costs are the total costs incurred by workers directly working to produce goods or provide services for customers. Indirect labor costs include the labor rates paid to support and run the business such as management, administration or building maintenance. Indirect labor costs have no direct relation to the production of goods or services.
For many businesses, direct labor costs are more than wages paid to employees. For these businesses, direct labor costs should include employee benefits and payroll taxes in addition to wages. This might include health and life insurance, workers' compensation insurance, company matched retirement contributions, and payroll taxes for all direct laborers.
Learn more about AccountingRelated Questions
-
Q:
How Do You Prepare a Profit and Loss Statement?
A: Preparing a profit and loss statement for a business entails calculating the net profit by knowing information, such as revenue, net sales, cost of goods, ... Full Answer >Filed Under: -
Q:
What Is a Direct Labor Budget?
A: A direct labor budget is a specified number of production hours a company requires to achieve a desired level of production in a given period of time. A co... Full Answer >Filed Under: -
Q:
How Do You Use a Sample Bill of Sale Template?
A: Use a sample bill of sale template to obtain the basic structure for the document from which you must customize to include the specific details of the sale... Full Answer >Filed Under: -
Q:
What Is the Prime Cost Formula?
A: The formula for prime cost is the sum of the direct cost of materials, the direct cost of labor and the direct cost of expenses, according to BusinessDicti... Full Answer >Filed Under:
