Question

are you able to find direct labor hours of publicly traded companies? if so where would i find best buys?

Answer 1

The definition of direct labor cost is different for companies operating in different sectors. Moreover, companies in similar sector also calculate it differently. This concept is more relevant in manufacturing/ production industry than service industry for manufacturing a product. In manufacturing industry, the labor cost is the cost of all the labor employed at the production line. It is calculated as job time * wages. The wages are average wages of the workers and are often taken as a fixed predefined rate unless specific exceptions. The wage rate if often inclusive of salaries of support functions such as QA dept. as a fixed percentage. Basically, for a large organization, calculating direct labor cost is not a straight forward task. Salaries of other support functions such as IT, security, housekeeping etc. are part of indirect labor cost.

You mentioned direct labor cost of for Best Buy so I assume retail sector is most relevant to you. Direct labor cost for a company in retail sector would include following components-

• Employee salary (employees working in the store)
• Cost of employees handling the warehouses and inventory
• Cost of employees involved in inventory movement and so on

A company in service/ retail industry is not obligated to show its direct labor costs in its financial statements. Moreover, it is not a relevant parameter of performance for a company in service/ retail industry. Hence, this cost is tracked closely by many analysts. Also, for a retail company, calculating exact direct labor cost across the divisions, product lines and business is very difficult, especially if they have different methods of calculating the same expense. We can find the direct labor cost of a company in service/ retail sector in its financial statements under the cost of revenue/ COGS, if at all it is reported. It can also be assumed a fixed % of total COGS based on reasonable judgement. However, this component is not mentioned in the financials of Best Buy.