Difference: Direct and Indirect Labour | Cost Accounting

The main difference between direct labour and indirect labour are as follows:

1. Direct labour can be conveniently identified with a particular cost centre or cost unit but indirect labour cannot be identified.

2. Direct labour can be allocated or charged entirely to a particular cost centre. On the other hand, indirect labour cannot be allocated or charged fully to any particular cost centre.

3. Direct labour is directly concerned with production but indirect labour is not directly concerned with production.

4. Direct labour results in a productive operation itself but indirect labour does not result in productive operation.

5. Direct labour cost forms an essential part of total cost of production, whereas indirect labour cost does not form an essential part of total cost.

6. Direct labour cost can be ascertained easily but indirect labour cost cannot be ascertained easily.

7. Direct labour cost varies directly in proportion to output, whereas indirect labour cost does not vary directly in proportion to output.

8. Direct labour cost can be controlled easily. On the other hand, indirect labour cost cannot be controlled easily.

9. Direct labour cost forms part of direct cost or prime cost, whereas indirect labour cost forms part of overheads, either Factory overheads or Administrative overhead or Selling and distribution overhead.

10. Direct labour cost is controlled through the technique of standard costing. But indirect labour cost is controlled through budgetary control.