Florida General Contractor Practice Exam

What is an example of an indirect cost in a construction project?

1. Materials

2. Labor

3. Overhead

4. Equipment Rental

The correct answer is: Overhead

An example of an indirect cost in a construction project is overhead. Overhead refers to the ongoing business expenses that are not directly tied to a specific project but are essential for the business to operate. These can include utilities, rent for office space, administrative salaries, and insurance. Although these costs support the overall functioning of the construction company, they cannot be attributed directly to any single project, making them indirect costs. On the other hand, materials, labor, and equipment rental are all direct costs. Materials are the physical supplies required for the project, labor refers to the workforce engaged in performing the construction work, and equipment rental involves the costs associated with using machinery on a project. Each of these costs can be directly linked to producing the project output, which differentiates them from overhead. Understanding this distinction helps in budgeting and financial planning within construction projects.