Direct Labor Budget

The Direct Labor Budget is developed using direct labor standards—the time allowed per unit of output and the standard cost allowed per hour of direct labor time—to calculate the budgeted cost for direct labor used. The company usually calculates a separate Direct Labor Budget for each product and each type of labor used in production at its standard cost.

The standard cost per hour of direct labor time will generally include wages and all other employee costs.
These other costs include employer contributions to Social Security (FICA) and Medicare, workers’ compensation insurance for workers who are hurt on the job, federal and state unemployment taxes paid by the employer, life and health insurance premiums if they are provided, any pension plan contributions paid by the company, and any other employee benefits. These may all be presented in an Employee Benefit Statement.