Calculate direct labor costs for goods produced or services provided.
Direct labor can be directly traced to the production of goods and services. Wages paid to employees who produce materials or provide services is classified as direct labor. Examples include the wages of workers on an assembly line, laborer pay for the repair of a roof or the captain of a commercial jet. To calculate the direct labor cost for a unit of production you must know the amount of labor paid to those employees and the number of units produced for the pay period. Most companies keep careful track of these numbers, resulting in more accurate direct labor costs per unit.
Instructions
Per-period or Per-job Direct Labor Rate
1. Multiply the number of hours worked for each employee by that employee's pay rate for that period. If you want a daily rate, multiply the number of hours for that day. If you're looking for a monthly or yearly rate use the same process, multiplying each employee's total hours by their pay rate.
2. Add up the total amount paid to all direct labor employees for your chosen period. This number is your direct labor cost per period. If you are looking for a direct labor cost on a per-job basis, the amounts paid for all applicable employees for the entire job is your "period" and your direct labor rate for that job.
3. Divide the direct labor cost by the number of units produced for the period in question. This is your direct labor cost per unit. If you are calculating the direct labor rate for a service industry, substitute the number of units with number of customers served.
