Enter the total hours worked, average hourly rate, taxes, and benefits paid to determine the direct labor costs.
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Direct Labor Costs Formula
The following formula is used to calculate direct labor costs.
DLC = TH * HR + T + B
- Where DLC is the direct labor costs
- TH is the total hours worked
- HR is the hourly rate
- T is the taxes paid during the time period
- B are the benefits paid during the time period
Direct Labor Costs Definition
Direct labor costs are defined as a cost of labor that goes directly into the production or manufacturing of a good. These include the wages, taxes, and benefits paid to the employees that directly worked on the product over a time period.
Direct Labor Costs Example
How to calculate direct labor costs?
- First, determine the hours worked and rate.
Determine the total number of hours and hourly rate for those working on the good.
- Next, determine the taxes and benefits.
Calculate the taxes and benefits paid to the employees during the same time period. For example, if employees get $5,000.00 paid out over the year in taxes and benefits, and the workers spent one month working on the product, then the taxes and benefits would be 5000/12 = $416.66.
- Finally, calculate the direct labor costs.
Calculate the direct labor costs using the equation above.