Difference Between Direct Labour And Indirect Labour Pdf

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Direct labour can be conveniently identified with a particular cost centre or cost unit but indirect labour cannot be identified. Direct labour can be allocated or charged entirely to a particular cost centre.

Difference Between Direct Cost and Indirect Cost

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The identification, measurement, and allocation of costs can help to determine the actual profit of the organization. Based on the relationship or degree of traceability to products, the costs are classified into direct costs and indirect costs. The two cost differ in the sense that expenditure which can be identified and allocated to a particular cost object or cost center, i. On the other hand, all the costs which are not tied to a particular cost center or cost object, i. Check out this article to have a clear understanding on the two. Indirect Cost is defined as the cost that cannot be allocated to a particular cost object. Benefits Specific projects Multiple projects Aggregate When all the direct costs are taken together they are known as prime costs.

For costing purposes, labour can be classified into two broad categories, i. The distinction between direct and indirect labour is important because it helps:. Direct labour can be described as the labour which is engaged directly in ill manufacture of a product or in a particular job or service and which can be convenient allocated to the job, process or production unit. It is the labour engaged in changing composition, form or condition of a product manufactured. It represents the labour when directly operates the manufacturing machinery and equipments.

Direct Labor vs Indirect Labor Costs: What Is the Difference?

The difference between direct labor and indirect labor is that only labor involved in the hands-on production of goods and services is considered to be direct labor. All other labor is, by default, classified as indirect labor. This distinction is important from an accounting perspective, since the two types of labor are treated differently. The accounting is as follows:. Direct labor.


can be allocated or charged entirely to a particular cost centre. On the other hand.


What is Indirect Labor Cost?

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The workers must be clearly involved in producing the product or providing the service. Direct labor costs are one of the costs associated with producing a product or providing a service. Furthermore, direct labor costs are in contrast to indirect labor costs. Sometimes it may be appropriate to use direct labor as a cost driver to allocate indirect costs to a production process.

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4 Response
  1. Faust C.

    Indirect labor cost is the cost of labor that is not directly related to the production of goods and the performance of services.

  2. Unamasblan1995

    Every business has to consider direct labor vs indirect labor costs when contemplating contracts.

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