Write a short note on direct and indirect labour cost.

Direct Labour Cost

Direct labour cost is the cost of labour which can be wholly and directly identified with a particular product.

Direct labour includes:

1. Labour engaged in the actual production of the product.
2. Labour engaged in aiding production by way of supervision, maintenance, etc.
3. Inspectors, analysts, etc., specially required for production.

Examples: Wages paid to a machine operator, wages paid to a carpenter in a furniture factory, or wages paid to workers directly engaged in manufacturing.

Direct labour cost forms part of prime cost and is directly charged to the product.

Indirect Labour Cost

Indirect labour cost is the cost of labour which cannot be wholly and directly identified with a particular product. It is the labour employed for performing tasks that are incidental to the manufacturing process rather than directly producing the goods.

Examples: Wages paid to the storekeeper, foreman, timekeeper and watchman.

Indirect labour cost is treated as part of factory overhead.