Accounting Dictionary

Indirect Labor

Indirect labor is a product cost, not a selling or administrative cost. It is a salary paid to someone who never touches the product.

Examples of indirect labor are supervisor’s salary and the janitor’s salary. They both work in production, but neither touches the product. Indirect labor is part of factory overhead. Direct labor and Factory Overhead are part of conversion costs, the costs needed to convert raw materials into a salable product.

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