ECONOMICS

Detailed explanation-1: -Cost Allocation Based on Direct Labor Overhead is applied based on the amount of direct labor consumed by a unit of production. This is an easy calculation, for there is usually an industrial engineering standard already in place that documents the amount of direct labor associated with a product.

Detailed explanation-2: -The cost of labor is broken into direct and indirect (overhead) costs. Direct costs include wages for the employees that produce a product, including workers on an assembly line, while indirect costs are associated with support labor, such as employees who maintain factory equipment.

Detailed explanation-3: -Basis for Apportionment The basis used for apportionment of costs is the number of cost centres when the expenses are to be shared equitably between them. This happens when an overhead can not be assigned directly to one specific cost centre.

Detailed explanation-4: -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.