Which of the following categories of labour cost will be classified as direct?
Answer Details
Factory workers' salary will be classified as direct labour cost.
- Direct labour cost refers to the cost of labour that can be directly attributed to the production of goods or services. It is the cost of labour that is involved in the manufacturing process, and it can be easily traced to the cost of production.
- In the case of a factory, the salary of the factory workers can be directly attributed to the production process because they are the ones directly involved in the manufacturing of goods. Therefore, the factory workers' salary is a direct labour cost.
- On the other hand, the accountant's salary, managing director's salary, and cashier's salary are indirect labour costs because they cannot be directly traced to the cost of production. They are salaries for staff who are not directly involved in the manufacturing process, but who perform functions that support the production process such as bookkeeping, management, and administrative duties.
- In summary, direct labour cost is the cost of labour that is involved in the manufacturing process and can be directly attributed to the cost of production.