Explain the Difference Between Direct Labour Costs and Indirect Labour

question 7

Essay

Explain the difference between direct labour costs and indirect labour costs. How would this information be captured on a timesheet by an employee?

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Definitions:

Dual Cost Allocation

A method in cost accounting that assigns costs to products or services based on both direct and indirect cost factors.

Variable Costs

Costs that vary in direct proportion to changes in production or sales volume, such as raw materials and sales commissions.

Long-Run Usage

Analysis or operations that consider a longer time horizon, focusing on trends and strategies sustainable in the future.

Reciprocal Method

An accounting method used for allocating costs between interdependent departments, accurately reflecting the shared services costs.