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Why direct production labor cost might be regarded as a fixed cost rather than as variable cost?
Wiki User
∙ 13y ago
Direct labor wages are normally Variable costs, charged directly to the Production Cost Account, what is commonly called WIP. It is commonly held that direct labor wages change proportionally to the changes of the production level.
In fact, however, hourly wages are only related to a time unit, not to pieces produced. True direct wages are piece-work wages, but very few industries pay their workers by unit of production. We should have the option to treat a direct labor wage as a fixed cost, just as salary is a fixed cost. Monthly or hourly, these payment are paid by time interval, not by production unit
Wiki User
∙ 13y ago
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