Direct labor cost

Direct labor cost may be determined by:

• Planning the work to be performed.
• Describing the skill requirements of each task.
• Matching tasks to employees.
• Determining the labor burden per hour and job time required for each task.

In manufacturing, the direct labor cost is part of the manufacturing cost per item and scales proportionally to the number of items produced. This is in contrast to indirect labor cost, (for example, supervisory staff), which is not directly proportional to manufacturing costs and is considered an overhead expense.^[1]

The direct labor cost may be calculated as the product of working time and employee total cost, inclusive of wages and benefits.^[1][2]

${\displaystyle {\text{Direct labor cost}}={\text{job time}}\times {\text{(wage rate + benefits cost)}}}$

Depending on the context, labor burden may be calculated on an hourly, daily, or other basis.^[3]

The job time may be measured via one of the following methods:^[4]

1. time study
2. work sampling
3. Predetermined motion time system

• Freight rate
• Job costing
• Labor burden
• Wage
• Workforce productivity