 Hello in this lecture we will define direct labor costs. According to fundamental accounting principles Wild 22nd edition the definition of direct labor costs is wages and salaries for direct labor that are separately and readily traced through the production process to finished goods. Support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it. When we're considering direct labor costs we are often considering them in terms of a manufacturing company comparing and contrasting direct labor to indirect labor few different ways we can break out costs within the manufacturing process. For example if we're producing inventory such as a tablet like so we could break out the process of costs into categories of the material the labor and the overhead and thinking about any type of inventory it's useful to think about the inventory in these components even if we just purchased and sell the inventory because at some point in time the inventory we are using had the direct materials but also had within the cost within the value of that inventory the conversion costs of labor and the conversion costs of overhead the materials will consist in this case of say metals and plastic but of course the conversion is going to be a huge factor including the labor now if that labor can be applied directly to the unit or the process or the batch then we're going to call that direct labor because we can apply that out directly if however it's something that cannot be applied directly to the batch say we're talking about a supervisor or something like that which is supervising for a large production process we we still have the cost of that supervisor that should be in the production process but we can't apply it directly out in a job cost system to the job or a process cost system to the process and therefore we would have to put it into overhead so the components we have are materials labor and overhead but we can break that out a little bit more in terms of the direct material versus indirect material and the direct labor versus indirect labor direct materials being the main thing the big costs that are going to be included in here indirect materials being those small costs that it's not worth our time to track and therefore they're going to be part of overhead direct labor being that labor that will be applied directly to the production process of the specific job or process that we can apply out directly indirect labor being those costs to the job or process such as the supervisors such as maintenance on the factory wages involved there that cannot be applied directly to a job or process and therefore would be grouped in overhead along with everything else involved in basically the factory that we cannot apply to a job or process that we would then use some kind of estimate in order to eventually apply an estimate them to the to a specific job or process