How to Add Direct Labor in Manufacturing Cost

I am new to Manager. How do you add direct labor to a specific unit in the production orders tab? Do you add it as a separate inventory item?

When you are creating production order, there is an option Add non-inventory cost into production which you can check. This will allow you to capitalize non-inventory expense (e.g. labor).

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Hi, I am new to Manager, I see this is a versatile program. I want to use the “labor” thing, but seems it is always accounted as “credit” which bring negative balance to the expense. Shouldn’t it be a positive? so the labor would be an expense?

Please let me know if I am wrong and how this actually work on the “Add non-inventory cost into production” on Production Order section.

Thank you

Well, no. When you are manufacturing something and adding the cost of labor into manufactured item, you are basically converting expenses into assets.

Think about it this way. You paid $100 for wages. Now you say, 20% of wages are direct manufacturing cost. So manufacturing will take $20 from wages and convert it into Inventory on hand so now this $20 is an asset, not an expense. That’s why adding non-inventory cost into manufacturing process is decreasing your expenses.


When I view my old production orders, why can’t it include non-inventory items like labor too? I need to clone my orders and direct labor is a critical input.

You want to select non-inventory item instead of an account? It wouldn’t make any difference as non-inventory item is ultimately linked with some account.

Sorry for the not so clear question. I have created recoveries accounts for direct labor and overheads, I use those for non-inventory costs. I already absorb labor and overheads into the cost of the product as our production is labor intensive. My question was about my already completed production orders. When viewing a completed production order (when I click ‘view’ on one of the production orders already created), only materials are shown, no non-inventory costs are shown even though I included them when I created the production order. These are as critical to the cost of my product as the materials. All I am asking is for production orders that I already finished and included non-inventory costs to show me the total cost when I view them, not just materials.

Thank you.

The latest version (16.9.38) will show non-inventory costs on printable view. I don’t like how it looks so likely some improvements will come but at least it shows for now.


Thank you Sir! I just updated to the new Manager and the printable view is complete and looks good to me. I can’t wait to see the further improvements, maybe the non-inventory costs can be cloned too.

Thanks again!


I am confused. When I add non inventory cost of production (lets say Labour cost) the cost is recorded as income in the Income statement (Income and expense account). I have seen and understood the clarification of this in above comments. But I don’t know how does it affect cash account because I pay money to employees but there is no such option in the “Add non inventory cost”.


  1. When I add non-inventory cost, there should be an option to enter cash payment by cash account or expense claim payer.

  2. Currently when you add non-inventory cost of production, employee clearing account is not seen in the lookup. I suggest to integrate this account so that when we add employee clearing account, there should be an option to select an employee and enter the amount so that the amount will be seen in the “Amount to be paid” to selected employee’s tab.

I kindly request anybody who have come across this, in the way different from what I have observed, to clarify it to me…

Thank you…

I think you misunderstand the addition of non-inventory costs to production orders. You are not adding specific non-inventory costs, such as the time charged by a certain employee. You are indicating that when you produce an item, more goes into the resulting inventory item than just material from other inventory items.

For example, if it takes $20 of inventory item A and $30 of inventory item B, plus labor worth $50 to produce inventory item C, C will be valued at a cost of $100 when complete. But this has nothing to do with the fact that employee X happened to be the one who performed the $50 worth of labor. No cash payments or expense claims are involved with a production order.

If things were otherwise, your inventory for item C might have 10 units built by employee X, 25 built by employee Y, and 50 built by employee Z. If those employees have a different hourly wage because of seniority or work at different paces because of experience, you would have three different costs for C, depending on who built them. Even the most sophisticated accounting systems don’t go to that level.

If it is showing as Income then the account selected is an income account. For the recovery of Labour, you need to add an expense account as per below as the Wages & Salaries, being a control account can’t be selected.

Then by using the COA Codes you can position that account

As explained, the adding of non inventory costs is totally unrelated to cash account transactions. You might do production runs for different products on Monday, Tuesday & Wednesday but not pay the labour until Friday.


Thank you all for your good and quick responses… Let me concentrate on your words and examples. And I will come back.