Direct Cost Is a Cost That Is Essay

Open, View, and/or
Download this Document

Total Length: 765 words ( 3 double-spaced pages)

Total Sources: 3

Page 1 of 3

Direct cost is a cost that is involved specifically and directly in the production of a good or service (No author, 2013). For example, in the production of a hamburger direct costs would be the ingredients. If the person cooking the burger only cooks burgers, and does one burger per hour (just an example), then the direct labor cost of that burger would be one hour's worth of wages. Sometimes, however, it can be more difficult to determine the direct cost of producing a good or service, and that is where the risk of errors comes into play.

For example all costs can be taken as direct costs. This is a common error. There is a logical slippery slope involved in attributing costs. So for example, our burger flipper might flip an average of 40 burgers in an hour. The company might be tempted to average that wage over the number of burgers, coming to a conclusion that the direct labor cost of a burger is 20 cents. There are two pitfalls in this example. The first is taking the average -- in another hour there might only be 30 burgers flipped, so the average labor cost per burger is different.

Stuck Writing Your "Direct Cost Is a Cost That Is" Essay?

View All Our Example Direct Cost Is a Cost That Is Essay

Have A Custom Example Essay Written

It can be difficult to determine an accurate figure for direct labor costs under these circumstances. For some tasks it is much easier to determine the direct labor cost. When you pay a plumber to fix your sink and he charges you $100 an hour for labor, that is a direct labor cost that is easy to measure. Many companies do like the burger joint and attempt to average out costs to determine a direct cost, but their figures are subject to fluctuations in production.

The second pitfall in the burger example is that the burger flipper might also perform other tasks. If this labor also is used to make fries and onion rings, then the direct labor cost per burger is even harder to calculate. The company would need to know how much time the person dedicated to each task. Short of putting the person on a stopwatch while they move around the kitchen, this is impossible. While there is direct labor involved in making burgers and fries, it can be difficult to know precisely how much time is dedicated….....

Show More ⇣

     Open the full completed essay and source list


OR

     Order a one-of-a-kind custom essay on this topic


sample essay writing service

Cite This Resource:

Latest APA Format (6th edition)

Copy Reference
"Direct Cost Is A Cost That Is" (2013, March 10) Retrieved May 6, 2024, from
https://www.aceyourpaper.com/essays/direct-cost-cost-86590

Latest MLA Format (8th edition)

Copy Reference
"Direct Cost Is A Cost That Is" 10 March 2013. Web.6 May. 2024. <
https://www.aceyourpaper.com/essays/direct-cost-cost-86590>

Latest Chicago Format (16th edition)

Copy Reference
"Direct Cost Is A Cost That Is", 10 March 2013, Accessed.6 May. 2024,
https://www.aceyourpaper.com/essays/direct-cost-cost-86590
   

Open, View, and/or
Download this Document
order custom essay example