direct labour cost

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Expenditure on wages paid to those operators who are directly concerned with the production of a product, service, or cost unit. It is one of the cost classifications making up the direct cost of sales of a cost unit; it is quantified as the product of the time spent on each activity (collected by means of time sheets or job cards) and the rate of pay of each operator concerned. A percentage of the direct labour cost is sometimes used as a basis for absorbing production overheads to the cost unit in absorption costing.

Subjects: Accounting.

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