ECONOMICS

Detailed explanation-1: -The direct labor cost formula is a simple equation for determining direct labor cost. The pay rate multiplied by the time spent working on the project yields the direct labor cost, or Direct Labor Cost= Pay Rate * Project Time.

Detailed explanation-2: -Calculate the direct labor hourly rate The hourly rate is obtained by dividing the value of fringe benefits and payroll taxes by the number of hours worked in the specific payroll period.

Detailed explanation-3: -The direct labor budget is used to calculate the number of labor hours that will be needed to produce the units itemized in the production budget. A more complex direct labor budget will calculate not only the total number of hours needed, but will also break down this information by labor category.

Detailed explanation-4: -It is calculated as: (Expected direct labour hours of actual output ÷ budgeted direct labour hours) × 100%. A ratio of > 100% will indicate above budget production volume and vice versa.