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Why we differentiate direct and indirect labor? The cost of labor which traceable to a specific cost unit is direct labor and which is not traceable is considered as indirect labor?
So what is reason of considering, normal overtime of direct labor, basic pay as direct whereas premium as indirect?
Do customer pay only direct labor cost as labor, whereas indirect labor cost is divided amongst all units and charged in form of overhead on customers invoice?If a customer orders a product they cannot usually control whether the product is made at 10am in the morning (not overtime) or 10pm in the evening (where wages attract a premium). A customer should not be penalised for the company’s oroduction scheduling.
Right sir. How are indirect labor cost than charged to customer? Like indirect labor basic pay.
We are talking about costing, not revenue. If the sales contract is fixed price, that is the end of the matter. If not fixed the company has to be able to justify higher prices.
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