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Dear john sir,
I asked a question in previous post regarding labour. Sir i will be very thankful if u explain a little bit why all payments to an indirect worker is treated as indirect cost even he is working on a specific job where his cost is traceable. (Direct cost is a cost whivh is traceable to a unit directly). Then why not we follow this criteria to treat a cost direct or indirect. I will be thankful if u explain the reasoningIt is simply definition – indirect costs (whatever they are) are overheads. Indirect labour is things like the wages of a factory supervisor or the wages of factory maintenance staff.
Although they are overheads, when costing a specific job it makes no difference anyway to the final result.
Even a supervisor is working on a specific job then still his cost will b treated as indirect cost(overheads)?
A supervisor spent 5 hours on a particular job. Rate/hour is 10. So payment will be $50. This $50 is direct or indirect cost?
Thanks for ur patience and kind reply
It is an indirect cost.
It is very unlikely that a supervisor (or any other indirect workers) would be working exclusively on a specific job. It would normally be part of their time and therefore the overhead would be absorbed in the normal way.
Even if they did work exclusively on the specific job (and so all of the cost were charged to the job) then it would still be classified as an overhead.
(Although in this case it would really be semantics – as I wrote before it would make no difference to the final total cost whatever it was called.)
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