Labour Cost

 

In product cost estimation, labour cost is an important part. It directly influence price of a product.

Labour cost

Aim of Labour Costing:

1. Collect and record all the cost and expenditure to the worker.
2. Compare actual expanses with the cost considered for product on regular interval.
3. This provide basis to increase worker efficiency by adapting different improvements in process, tools and technology. 
4. This provide basis to revise labour cost of existing part as well as new product cost estimation.

Labor cost divided in two type:

1. Direct labour cost &
2. Indirect labour cost

Direct Labour Cost:

It is the amount paid to the workers who are converting direct material into salable product.

Example: Machine operator, fitter, welder, Painter etc.

Indirect Labour Cost:

It is the amount paid to the workers who are directly not converting direct material but helps in other activity to run factory.

Example: Security, Store person, Crane operator, Supervisor, Helper, Maintenance person etc.

Procedure to calculate Direct Labour cost:

1. Identify and prepare list of process and operation carried out for the product.
2. Record time of each activity of operation to complete the process.
3. Collect rate of each operation.
4. Calculate direct labour cost 

Refer this link for Indirect labour cost

SHARE

Milan Tomic

Hi. I’m Designer of Blog Magic. I’m CEO/Founder of ThemeXpose. I’m Creative Art Director, Web Designer, UI/UX Designer, Interaction Designer, Industrial Designer, Web Developer, Business Enthusiast, StartUp Enthusiast, Speaker, Writer and Photographer. Inspired to make things looks better.

• 
• 
• 
• 
•