Learning Materials For Accounting, Management , Finance And Economics.

Thursday, May 27, 2010

Importance Of Labor Cost

Proper study, analysis and control of labor costs are important to all manufacturing concern because of the following reasons.

* Labor cost is main element of cost which covers one of the major portions of the total cost of a product or job.

* Labor cost is more difficult to control as compared to material cost due to the involvement of human element.

* Labor cost is affected due to a change in government policy and requirement of trade union.

* Labor cost is adversely affected due to dissatisfaction , irregularity, inefficiency, idle time, high labor turnover, lack of interest and negative attitude of the workers.

* Labor cost is important from the fact that the direct labor cost is taken as the basis of estimating the amount of factory overheads while determining the product cost.