Like the labor, labor costs are also of two types : direct labor cost and indirect labor cost which can be understood 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 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.
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 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.