Cost Accounting

What is Direct Labour in Costing?

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Direct labour is all labour expended in altering the construction, composition, confirmations or condition of the product. In simple word, it is that labour which can be conveniently identified or attributed wholly to a particular job, product or process or expended in converting raw materials into finished goods.

direct labour in cost accounting

Another definition which can be used to define direct labour is the “labour that is engaged in the conversion of raw material into finished goods.” It is always attributable to the particular activity.

Wages of such labour are known as direct wages. Thus, it includes payment made to the following groups of labour:

(i) Labour engaged in the actual production of the product or carrying out of an operation or process.

(ii) Labour engaged in aiding the manufacture by way of supervision, maintenance, tools set, transportation of materials etc.

(iii) Inspector, analysts etc, especially required for such productions.

The wages paid to supervisions, inspector, etc., though not direct labour, can be treated as direct labour if they are directly engaged on specific product or process and the hours they spend on in can be directly measured without much of ad effort. Similarly, where the cost is not significant like the wages of trainees or apprentice, their labour thought directly spent on a product, is not treated as direct labour. The main problem that cost accountants have to face is that in case of indirect labour they have to allocate the appropriate amount in the form of overheads while in the case of direct labour no such problem arises.

Impact of Direct Labour Cost

Direct labour cost proportionately affects the cost per unit of the product.

Although the labour cost is variable in nature still it is also fixed because the firm has to incur the cost irrespective of the quality of the goods produced.

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