Direct labor hours is an appropriate cost driver when

Cost Driver Rates. A cost driver rate is the amount of indirect or variable cost assigned to each unit of cost driver activity. For example, you may apply indirect overhead to direct labor hours as $50 dollars per hour. In this case, for each hour of direct labor required for production, the company would then allocate $50 of indirect overhead costs to the production activities or . In production, processes in which direct labor is an appropriate cost driver, allocate indirect costs to the cost of units of output via DL hours. Then, allocate indirect costs to the units of output using a cost driver rate. For example, it could be $2 dollars per hour of direct labor, or $ per hour of direct labor, depending on the specifics of the production process. Direct labor is a typical cost . Direct labor or machine hours may not be the appropriate cost driver for overhead in all areas of manufacturing due to the complexities of many manufacturing processes. Many companies use activity-based costing (ABC) which uses multiple drivers (items that consume resources) rather than just one driver to apply overhead to their activities.

Calculate the labor cost per unit. The labor cost per unit is obtained by multiplying the direct labor hourly rate by the time required to complete one unit of a product. For example, if the hourly rate is $, and it takes hours to manufacture one unit of a product, the direct labor cost per unit equals $ ($ x ). 4. A single predetermined manufacturing cost driver rate based on total plant direct labor hours is: a. $ 4 per direct labor hour. b. $10 per direct labor hour. c. $20 per direct labor hour. d. $40 per direct labor hour. Cost Driver Rates. A cost driver rate is the amount of indirect or variable cost assigned to each unit of cost driver activity. For example, you may apply indirect overhead to direct labor hours as $50 dollars per hour. In this case, for each hour of direct labor required for production, the company would then allocate $50 of indirect overhead.

Labor can be either a fixed or variable cost, depending on how you pay your workers. All organizations have to pay certain expenses just to stay in business, regardless of how many sales they make. Examples of so-called fixed expenses inclu. Launching a start-up is an exciting opportunity. Determining the costs of launching a start-up begins with knowing the factors on which to base your estimates. Use these guidelines to help you figure out your business start-up costs. In cost accounting, the manufacturing process will have two main types of costs, direct and indirect. A direct cost is one that is directly associated with the production and manufacturing of a product. An indirect cost is a cost that does.