Labour Cost

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Labour cost is an important part of the ‘Costing Introduction Free Course’ and Accounting Trainees need a good understanding of labour cost.

You are part way through the ‘Costing Introduction Free Course’ and before reading this page you should have read:
-Costing Introduction Free Course
-Costing Systems
-Cost Centres and Cost Behaviour
Inventory Valuation

Labour cost, along with cost of materials and overheads are a major cost to be controlled by companies. As an Accounting Trainee you should be aware of the many different ways in which employees can be paid.

You should be able to define and give examples of:
basic pay
overtime
bonus payments
piecework

An employee may be paid with a combination of the above and you should be able to calculate accurately his/her pay.

Examiners will test you on your knowledge of direct and indirect labour costs, and how labour can be classified and coded under fixed and variable costs.

labour cost
Labour Cost


Another popular topic with Accounting examiners is the concept of prime cost, factory cost and cost of goods sold.

Below is the Amazon link to the relevant books covering Labour Costs:


Now lets test your knowledge of Labour Costs – please attempt the quiz below.

Labour Costs : QUIZ

Question 1
A payment system when the employee is paid for the work carried out, and does not take account of the time taken.

Question 2
A time rate of pay that is applied to the normal contracted work time, and is usually an hourly rate is called the _______ ________

Question 3
Piecework payments would be classified as fixed costs – true or false?



Question 4
A payment made to an employee as a reward for productivity is known as a ________

Question 5
Direct labour includes the wages of the factory supervisor -true or false?

Click on the link below to take you to the next topic:

Budgets and Variances

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