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Word of the Week 'Direct Labor'


Direct labor refers to the employees and temporary help who work directly on manufacturer's products. (People working in the production area, but not directly on the products, are referred to as indirect labor.)

The direct labor cost is 1) the cost of the wages and fringe benefits of the direct labor employees and 2) the cost of the temporary help who work directly on the manufacturer's products.

The direct labor cost is also defined as:

labor involved in production rather than administration, maintenance, and other support services.

  • a product cost (along with the costs of the direct materials and manufacturing overhead)

  • an inventoriable cost (along with the costs of the direct materials and manufacturing overhead)

  • a prime cost (along with direct materials)

  • a conversion cost (along with manufacturing overhead)

 

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