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Direct
Labor
Direct labor is the cost of the person(s) that actually manufactures
the
product. This person is involved in creating value in
the part.
These
employees manufacture or assemble all or part of a product.
Some of the jobs that she will do are:
You can see the pattern, this person is creating a valuable product or
service that can be sold.
Labor
categories that are indirect labor:
Machine
repair employees, fork truck drivers, set up people, etc, do not fall
into the direct category. They do not directly add value to
the part. These employees are considered indirect
labor.
Direct
Cost per Part:
Cost per part is calculated by taking the wage per hour divided by the
parts per hour produced.
For Example:
Labor wage = $12 per hour, and the employee
can make 300 parts per hour. The calculation is:
$12/300 = $.04 per part
Collecting
labor costs:
Direct
employees usually fill out time cards. Either the employee
herself or a clerk will enter the time worked and what jobs were worked
on.
This information is then available in the MRP system so reports can
be run.
Other cost
elements:
Indirect
Labor
Material
Cost
Burden Cost
Administrative
Cost
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