CPIM Practice Exam

What is classified as 'Direct Labor' in manufacturing terms?

1. Labor that is not directly associated with production

2. Labor that is specifically applied to the good being manufactured

3. Labor costs incurred due to machine operation

4. Overtime labor costs

The correct answer is: Labor that is specifically applied to the good being manufactured

The classification of 'Direct Labor' refers specifically to the labor that is directly tied to the production of goods. This means that the labor involves the actual hands-on work that transforms raw materials into finished products. Thus, any labor costs associated with these workers who are actively engaged in the manufacturing process of a product is categorized as direct labor. In contrast, labor that is not directly associated with production does not contribute to the creation of the product itself and thus does not qualify as direct labor. Additionally, while labor costs from machine operation can be significant, they do not fall under the category of direct labor since they are related to equipment rather than the labor directly transforming the product. Similarly, overtime labor costs can be direct or indirect depending on the context of the work, but they do not inherently define what direct labor is.