Labour Cost: This is the cost, incurred in the form of remuneration paid to the employees or labours of the organisation. The workforce required to convert material into finished product is called labour. It can be direct or indirect.

-Direct Labour Cost is the cost incurred on those employees who directly take part in the manufacturing process and easily identified with the individual cost centre.

-Indirect Labour Cost is the cost incurred on those employees who do not directly take part in the manufacturing process and cannot identified with the individual cost centre. Example: salary of foreman, salesmen, director’s salary, etc.