Direct labour can be a Period Cost

Direct labour can be a Period Cost

Theoretical saying direct labor can be paid on monthly instead of on hour bases or output bases. But it does not mean that direct labour will be charged as period cost and not as direct cost. Because the direct labour is directly associated with production and if there is no production , there is no reason to pay the labour.Direct labour is always hired when there is an activity.

Direct labour payment on periodically bases must be confused with its nature. and direct labour will remain the direct cost all the time by its nature i.e vary with level of activity. The monthly payment is just a way of payment and does not change the nature of cost. Therefore Direct labour can be paid on monthly bases but will be charged as production cost and not as period cost.


Example of Monthly payment to Direct Labour

10 people employed to by a factory and paid a monthly salary of 10,000. what be would direct labour cost for the month.

10 people X 10,000 = 100,000