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When you are calculating manufacturing overhead on a Master Budget, if Direct Labor is computed per...

When you are calculating manufacturing overhead on a Master Budget, if Direct Labor is computed per unit (without # of hours )-- where do you list Labor cost? I know there is a Direct Labor section but where is it captured in Manufacturing Overhead?

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Answer #1

Direct labor is not a part of manufacturing overhead. Therefore, it will not be shown under the heading manufacturing overhead at all in any budget. The manufacutring overhead budget will not contain direct labor cost.

It is possible that manufacturing overhead is applied based on direct labor cost. However, in that case also manufacturing overhead budget will not show direct labor figures. Only the calculation of applied manufacturing overhead will be done using direct labor cost.

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