Cost Accounting Standard
Authoritative Statutory Source
Labor Burden Overhead Allocation
Distribution of indirect warehouse, supervisory, and equipment costs onto direct labor hours.
Detailed Definition & Statutory Context
Labor Burden Overhead Allocation is governed by Cost Accounting Standard standards across corporate payroll administration, statutory tax withholding, and general ledger labor accounting. Rigorous compliance with Labor Burden Overhead Allocation prevents IRS Form 941 deposit penalties and FLSA wage-and-hour litigation.
Statutory Formula & Equation
Overhead Rate per Hour = Total Indirect Operating Overhead ÷ Total Direct Labor Hours
General Ledger / Payroll Journal Entry Standard
Debit: Gross Payroll Expense / Employer Tax Expense
Credit: FICA Taxes Payable / Federal Income Tax Payable / Net Pay Cash
Credit: FICA Taxes Payable / Federal Income Tax Payable / Net Pay Cash
Common Operational Pitfalls
- Excluding non-discretionary bonuses from FLSA overtime regular-rate calculations.
- Failing to cap Social Security tax withholding once employee earnings exceed the $168,600 wage base.
- Misclassifying non-exempt hourly employees as exempt salaried workers.