Dictionary of Accounting Terms: direct labor budget
direct labor budget
schedule for expected labor cost. Expected labor cost is dependent upon expected production volume (production budget). Labor requirements are based on production volume multiplied by direct labor-hours per unit. Direct labor-hours needed for production are then multiplied by direct labor cost per hour to derive budgeted direct labor costs. For example, assume budgeted production of 790 units, direct labor-hours per unit of 5, and direct labor cost per hour of $5. The expected labor cost equals:
| Expected production | 790 units |
| Direct labor-hours per unit | × 5 |
| Direct labor-hours | 3,950 |
| Direct labor cost per hour | × $5 |
| Total direct labor cost | $19,750 |
