Direct labour cost is the wages paid to those who work on a production line, are involved in assembly, or are involved in the output of a service business.
Time rate
where an employee is paid on the basis of time spent at work
Piecework rate
where an employee is paid an agreed sum for each task carried out or for each unit of output completed
Bonus system
where an employee paid on a time rate receives a bonus if output is better than expected
Ways to record hours worked
Clock card
Piecework tickets
Computer cards
Route cards
Job cards
Time sheets
Idle time occurs when production is stopped through no fault of the production line employees
When production employees are paid based on output, a calculation of equivalent units may need to be made
Transfer of direct labour costs to production
DR production
CR wages control
Transfer of indirect labour costs to production overheads
DR production overheads
CR wages control
Transfer of administrationlabour costs to non-production overheads
