Direct labour budget

Direct labour budget converts the production plan into the hours and wage cost of directly productive workers.

Also known aslabour budget

ByHoang TruongUpdated June 30, 2026

FrameworkMaster budgeting

See it move

Loading infographic...

A multiplication tree shows that the direct labour budget of €84,000 is the product of three inputs: 4,000 units planned for production, 1.5 hours of direct labour per unit, and a wage rate of €14 per hour. The tree structure makes clear that a change in any one of the three inputs — planned volume, the hours standard, or the hourly rate — will alter the total labour budget proportionally.

Where it fits

SubjectManagerial AccountingAdvancedTopicBudgeting & the Master BudgetAdvanced

The formula

LaTeX

\text{Total DL Hours} = \text{Units to Produce} \times \text{DL Hours per Unit}

Variables

$T o t a l D L H o u r s$: Budgeted direct labour hours for the period (hours)
$U ni t s t o P r o d u ce$: Planned production volume from the production budget (units)
$D L H o u r s p er U ni t$: Standard direct labour hours per unit (hours/unit)

LaTeX

\text{Total DL Cost} = \text{Total DL Hours} \times \text{Wage Rate per Hour}

Variables

$T o t a l D L C os t$: Budgeted direct labour cost for the period (€)
$T o t a l D L H o u r s$: Budgeted direct labour hours (hours)
$W a g e R a t e p er H o u r$: Standard wage rate (€/hour)

Check yourself

PracticeCORE

A plant plans to produce 3,500 units in the coming period. Each unit requires 2 direct labour hours and the standard wage rate is €16 per hour. What is the total direct labour cost budget?

Select an answer to check your understanding.