Direct labor refers to the work performed by employees who are directly involved in the production of goods or services. This includes tasks such as assembly line work, machine operation, and any other activities that contribute directly to creating a product. The costs associated with direct labor are typically variable, meaning they can change based on the level of production. In accounting, direct labor is a key component of cost of goods sold (COGS) and is essential for determining the overall profitability of a business. Companies track direct labor costs to manage budgets and improve efficiency, ensuring that they can meet production demands while controlling expenses.