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CA Intermediate · Cost and Management Accounting · Employee Cost and Direct Expenses

Which of the following is treated as an employee cost that is NOT directly traceable to a specific cost unit, and is therefore normally classified as indirect labour cost?

The wages of a factory storekeeper who serves all production departments are indirect labour cost. The storekeeper cannot be traced to any single job or cost unit, so the cost is collected as factory overhead. The other workers each work on an identifiable job or order, making theirs direct labour.

  1. AWages of a machine operator working only on Job 114
  2. BWages of a factory storekeeper who serves all production departmentsCorrect
  3. CPiece-rate wages paid to a tailor for stitching a specific order
  4. DWages of a carpenter engaged only on one customer's furniture order

Explanation

Indirect labour cannot be conveniently identified with a particular cost unit. A storekeeper serves all departments, so the cost is a factory overhead. The other three workers are each identifiable with a specific job or order, so they are direct labour.

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