Labor burden is calculated as what?

Labor burden is calculated as what?

• A. Overhead plus materials
• B. Direct labor cost only
• C. Direct labor cost plus payroll-related costs
• D. Materials plus subcontractor costs

Answer: (C)

Labor burden represents the full cost of employing workers on a project, not just the wages paid to them. It includes direct labor plus the costs that accompany payroll—things tied to employing those workers but not paid as wages themselves. Examples are payroll taxes (FICA, FUTA, SUTA), workers’ compensation, unemployment insurance, health benefits, retirement contributions, and payroll processing. Adding these payroll-related costs to direct labor yields the total labor cost used for costing, bidding, and accounting. That’s why the best choice is direct labor cost plus payroll-related costs. It’s not overhead plus materials, nor direct labor cost alone, nor materials plus subcontractor costs, since those don’t represent the comprehensive labor-related costs tied to employing and servicing workers on a job.

Labor burden represents the full cost of employing workers on a project, not just the wages paid to them. It includes direct labor plus the costs that accompany payroll—things tied to employing those workers but not paid as wages themselves. Examples are payroll taxes (FICA, FUTA, SUTA), workers’ compensation, unemployment insurance, health benefits, retirement contributions, and payroll processing. Adding these payroll-related costs to direct labor yields the total labor cost used for costing, bidding, and accounting.

That’s why the best choice is direct labor cost plus payroll-related costs. It’s not overhead plus materials, nor direct labor cost alone, nor materials plus subcontractor costs, since those don’t represent the comprehensive labor-related costs tied to employing and servicing workers on a job.