Write short notes on: (a) Direct Labour Cost (b) Indirect Labour Cost

(a) Direct Labour Cost

Direct labour cost is the cost of labour which can be wholly and directly identified with a particular product or job. It is the remuneration paid to workers.

It includes:

1. Labour engaged in the actual production of the product.
2. Labour engaged in aiding production through supervision and maintenance.
3. Inspectors, analysts and other specialists required specifically for the production.

Examples:

• Wages paid to a machine operator.
• Wages paid to a carpenter in a furniture factory.
• Wages paid to weavers in a textile factory.

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

(b) 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 cost of labour employed for performing tasks incidental to manufacture — i.e., supporting the production process rather than directly producing the goods.

Examples:

• Wages paid to storekeeper.
• Wages paid to foreman.
• Wages paid to timekeeper, watchman.
• Salary of factory supervisor / factory clerk.

Indirect labour cost forms part of factory (manufacturing) overhead.