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direct labour cost

A Dictionary of Business and Management | 2006 | © A Dictionary of Business and Management 2006, originally published by Oxford University Press 2006. (Hide copyright information) Copyright

direct labour cost (direct wages) Expenditure on wages paid to those operators who are directly concerned with the production of a product, service, or cost unit. It is one of the cost classifications making up the direct cost of a cost unit; it is quantified as the product of the time spent on each activity (collected by means of time sheets or job cards) and the rate of pay of each operator concerned. A percentage of the direct labour cost is sometimes used as a basis for absorbing production overheads to the cost unit in absorption costing.

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