What type of probability distribution is used for direct labor cost per unit?

• A. Normal distribution.
• B. Discrete probability distribution.
• C. Uniform distribution.
• D. Poisson distribution.

Answer: (B)

Direct labor cost per unit is modeled as a discrete random variable because, in practice, the per-unit cost can take only a finite set of values. These values come from distinct cost scenarios such as different worker classifications, standard versus overtime rates, or different wage bands, each with its own probability. A discrete distribution lets you assign a probability to each specific cost level, which matches how the cost outcomes actually occur in practice.

Using a normal distribution would imply continuous, bell-curve type variation around a mean, which doesn’t align with having a limited number of labeled cost levels. A uniform distribution would imply every value within a range is equally likely, which is rarely the case for labor costs that depend on discrete wage categories. A Poisson distribution is for counting events, not monetary amounts, so it isn’t appropriate for per-unit cost.