Meaning and Definition of Direct Labor (Cost Accounting).
Direct labor is all labor expended in altering the construction, composition, confirmation or condition of the product. In simple words, it is that labor which can be conveniently identified or attributed wholly to a particular job, product or process or expended in converting raw materials into finished goods. Wages of such labor are known as direct wages. Thus, it includes payment made to the following groups of labor:
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- Labor engaged on the actual production of the product in carrying out an operation of process.
- Labor engaged in aiding the manufacture by way of supervision, maintenance, tools setting, transportation of material etc.
- Inspectors, analyses etc. specially required for such production.
The wages paid to supervisors, inspectors, etc., though not direct labor, can be treated as direct labor if they are directly engaged on specific product or process and the hours they spend on. It can be directly measured without much of an effort. Similarly where the cost is not significant like the wages of trainees or apprentices, their labor though directly spent on a product is not treated as direct labor.