Direct labor costs

Last updated: 26.03.2016

Direct labor costs are together with direct material costs and possibly direct expenses part of direct (prime) costs. As being their part, they are directly and clearly identifiable with cost object (usually product or service). That means they are the costs DIRECTLY associated with the production process of specific product.

Direct labor costs in particular include wages of workers but for example also:

  • salaries non-production staff if they work identifiable time ONLY in production
  • salaries of quality control personnel

 

Proportion of direct labor costs on total costs is reducing because of the increased automation.

 

Because the production differs from industry to industry, or even from business to business it is difficult to prepare a detailed list of direct labor costs. There are usually only a several general lists and definitions (see e.g. above) which can help to comprehend their meaning. Therefore, the final detailed classification is usually up to the entity.

 

More about direct costs and their booking here.



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