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

Concept of Idle time

Concept of Idle time

The idle time is the simply the difference between the difference between the hour paid and productive hours. There are number of reason for idle time which include the strike, machine break down, stock out.

Idle time and efficiency

The idle time concept will not be confused with the efficiency and if the worker work below the standard hour required it can not be treated as idle time. The difference between actual hour and expected hour is low efficiency and not idle time.

Cost Classification

Cost classification can be performed in many ways but however there are four important ways of classifying the different cost which includes the classification by nature , classification by tractability and classification by cost behavior.

Classification By Nature

There are basically four types of costs involve in a production process and these cost include the material cost , labor cost and overheads cost.

Classification by Tractability

The other important way is to classify the cost is its tractability to the product. The cost is classified into direct and indirect cost. The direct cost is directly related or traceable to production process or product whereas the indirect cost not directly related to production process of product.

Classification by Cost behavior

in this type classification the cost behavior to level of activity is bases for classification. The cost is basically classified into variable cost and fixed cost. The cost which react to level of activity know as direct cost and the cost which remain unaffected with level of activity know as fixed cost.

Overseas operations and local market understanding

Overseas operations and local market understanding

Overseas operation is a right direction to understand the local market and its dynamics. each market has its own dynamics. There are number of factor which make one market different from another and those factor can only be deeply understood when you are operating in that market.

While operating in another country entity is interacting with different people at different level and this provides entity a lot of information for understand the market and  decision making.

Interaction with Customer

The entity has direct interaction with the customer and thus in a better position to understand the customer expectation from the entity.

Social values

The entity can understand the social values of the society by starting the overseas operation. This provides and opportunity to entity to interact with different segment of society.

Product Design and features

The overseas operation give an idea about what type of product is needed in the market and what should be the features of those product.

Market Nature

The overseas operation also provide an opportunity to understand the market nature whether the market is a price sensitive or quality conciseness.

Overseas Operations and Customer Relationship

Overseas Operations and Customer Relationship

Overseas operations is really helpful to build a direct relationship with the customer and entity can retain the customer.

Customer Confidence

The overseas operation improve customer confidence on organization product and customer physiological attach with the product.

Customer problems understanding

Overseas operation is also helpful to understand customer problems and issues in details and entity are in a better position to resolve the customer problems and issues.

Customer Satisfactions

Overseas operation helps entity to improve the customer satisfaction level by resolving the customer issue and by providing the committed product.