Direct vs Indirect Labor: Unraveling Your Business's Hidden Costs! #shorts
In this short instructional video, Bill Canady explains the distinction between direct and indirect labor. Direct labor consists of hours that can be directly tied to a specific unit of output—such as a part made, an order shipped, or a job installed—while indirect labor encompasses all other labor costs. He highlights that for many middle‑market companies these two categories are interwoven within Cost of Goods Sold (COGS) and departmental budgets, making it extremely difficult to determine how much labor each business segment actually consumes. Canady points out that without separating the two, segment‑level labor consumption figures become speculative, essentially “fiction with decimal places.” The video underscores the importance of untangling direct and indirect labor to achieve accurate segment cost analysis.
