Is idle time a direct cost?

Treatment of idle time: Idle time means the amount of time the workers remain idle in a normal working day. The cost associated with idle time is treated as indirect labor cost and should, therefore, be included in manufacturing overhead cost.

Explore more on it. Also, what is idle time cost?

Idle time is the unproductive time of employees for which they are still paid. Idle time may be normal or abnormal. In cost accounting, the cost of such idle time is included as either direct labor or manufacturing overhead and is part of the total product cost.

Beside above, what are the causes of idle time? Idle time indicates that time for which wages are paid to the workers but no production is obtained during that time. - Economic Causes includes: Seasonal, cyclical or industrial nature. - Administrative decisions are also a big cause of idle time.

Also, is overtime a direct cost?

Overtime premiums are only treated as a direct cost if it is for a specific job at the customers request (otherwise the overtime premium is treated as an indirect cost). For grade A, all of their basic pay is a direct cost. So the basic pay for their overtime is 30 hours x $10 = $300.

How is idle time wages treated in cost accounts?

Normal Idle Time: The wages paid for the normal idle time period is treated as production overhead and absorbed into cost of product by adopting an absorption rate. The normal idle time in tool setting etc. can be charged at inflated rate. Jobs are charged at inflated rate.