Indirect labor
Labor costs that cannot be specifically linked to creation of specific products, but which are necessary for producing those products. (Contrast with direct labor) Machine maintenance wages and janitorial wages are examples. On the income statement, indirect labor costs are a part of manufacturing overhead, which, in turn is part of cost of goods sold (CGS). As a component of CGS, the higher indirect labor costs, the lower the gross margin (and income as well).
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