Types of Labor cost

Like the labor, labor costs are of two types such as follows

1. Direct Labor Cost

Direct labor cost is the amount spent by the factory for those workers involved directly in the manufacturing process. It can be measured conveniently and accurately on per unit of output basis. Direct labor cost can be identified and allocated to the specific job or process or product. It forms a part Types Of Labor Costs

of the prime cost. The examples of direct labor costs are the payments made to the workers engaged in making table, printing a book and constructing a dam etc.

2. Indirect Labor Cost

Indirect labor cost is the amount spent by the factory for those workers who are not directly engaged in the production process. Indirect labor cost refers to the expenses incurred in remunerating such workers who assist the direct labor to complete the manufacturing processes. It can not be identified and measured accurately on per unit of output basis. It is incurred for the benefits of a number of cost centers. It forms a part of the overhead costs. Payment made to the sweepers, watchmen, cleaners, supervisors and accounting personnel are the examples of indirect labor cost.