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What is Direct Labor Cost and why is it important?

What is Direct Labor Cost and why is it important?

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Answer #1

Direct labor :-

Direct labor is the salaries and Wages paid to employees or workers who are directly involved in the manufacturing of a product or rendering a service. For example, production line workers.

Importance :-

​​​​​Direct labor, along with direct materials constitute most of the production costs in a manufacturing company. Therfore managers have to pay special attention to what the company is incurring towards direct labor. And more often than not, direct labor hours is taken as allocation base for allocation of overhead.
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