The indirect labor costs are typically a percentage of the direct labor costs, and the percentage depends on the type of manufacturing. For example, in a factory where workers are required to wear uniforms, the cost of the uniform is a direct labor cost, but the cost of laundering the uniform is an indirect labor cost.
The factory labor cost for the year amounted to $1,450,000. Indirect labor cost amounted to $900,000.
Indirect labour is a very common type of factory overhead. In short, indirect labour refers to the cost of labor that is not directly related to the production of a specific good or service. In other words, indirect labour is any form of labor that is required for the purpose of running a business.
The first thing to know is the difference between direct and indirect labor. Direct labor is the part of a company’s costs that can be easily traced to a particular product. Indirect labor is the part of a company’s costs that cannot be easily traced to a particular product.
About 85% of the factory's labor cost for the year consists of indirect labor, or the labor cost of supervisors and the factory's office staff. This percentage is based on the following figures: