How do Companies in general identifies costs as a direct and indirect cost?
Although I am aware of the difference between direct and indirect, but the practice overall varies in industry. Some articles states that Production Manager, Maintenance Officer, Procurement officer, Supervisor and Quality Control technician can be included as part of direct labour cost (I believe in this case the "Cost Object" is the Factory) whereas in others only Labour involved in actually making the product are classified as direct labour cost.
How about in the case where assuming if the production is fully automated will there be any direct labour cost involved?
Any opinion on this matter will be highly appreciated. Thanks in advance
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you will find
on this forum that people will be willing to help with this sort of post as long as you are upfront about it Sorry but I cannot help further since I a tax practitioner.
Broadly it is whatever suits and is useful to you.
There are no hard and fast rules. Direct costs generally move in line with increasing production level - such as material cost or direct labour.
Indirect costs, such as supervision, are not assumed to increase with production level.
Of course these days direct labour tends to be salaried, and a lower proportion of production cost given the increase in mechanisation.