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 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

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* 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

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The direct labor cost is part of the manufacturing cost.

## Calculation of direct labor cost

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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]\-

Direct labor cost

job time

wage

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

Depending on the context, there are various methods to calculate personnel costs, such as on an hourly or daily basis.[2]

## Wage

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

## Calculating job time

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The job time needs to be measured by one of the following ways:[3]

1. time study
2. work sampling
3. Predetermined motion time system

## See also

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* Freight rate
* Job costing
* Labor burden
* Wage
* Workforce productivity

## References

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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. ^ "Calculate Personnel costs". EU Funds. Retrieved 17 February 2022.
3. ^ Kanawaty, G. Introduction to Work Study, International Labour Office, 1992, ISBN 978-92-2-107108-2