Labor cost per unit - direct labor only or fully burdened cost?
Allan Kaplan (CFO, Euclid Systems Corporation)
| Jan 19, 2012I'm having a 'discussion' with our VP Operations as to what should be considered as part of labor cost per unit. I take the position that it should be a total burdened labor cost per hour (including employer costs, vacation, etc.). He takes the position it is direct labor only, and that the balance of the costs are indirect costs of goods sold. Thoughts?
Answers
Company: SBA * Consulting, LTD
According to "Cost Accounting, A Managerial Emphasis", 8th Ed by Horngren, Foster & Datar, Prentice Hall 1994, Page 41-42:
"...Examples include wages and fringe benefits paid to machine operators and assembly-line workers."
You win!
Company: Rexanto
Wayne; great quote. ;-)
Concurring that this is how we do it as well. The logic argument is "that which is variable with the individual employee is a labor direct cost."
Company: Euclid Systems Corporation
Can I get you to scan that page and send it to me? akaplan98 @ gmail
Thanks.
Company: TTX
I consider the resource, not the cost components of the resource, to be direct or indirect. The person's time is the resource. If the person's efforts are "direct", the cost of that person is also direct. An estimate of the labor resource cost should be burdened, including consideration of time paid, not worked. The level of nominal "precision" is discretionaryl but should be "close" and directionally correct.