Definition of Direct Labor
Direct labor refers to the employees and temporary staff who work directly on a manufacturer’s products. (People working in the production area, but not directly on the products, are referred to as indirect labor.)
The direct labor cost includes the wages and fringe benefits of the direct labor employees and the cost of the temporary staff that are working directly on the manufacturer’s products.
The direct labor cost is classified as the following:
- A product cost (along with the costs of the direct materials and manufacturing overhead)
- An inventoriable cost (along with the costs of the direct materials and manufacturing overhead)
- A prime cost (along with direct materials)
- A conversion cost (along with manufacturing overhead)
