Florida General Contractor Practice Exam

What is typically included in the fixed overhead costs in a contractor's budget?

1. Variable labor costs

2. Utilities and rent

3. Material purchase costs

4. Direct project costs

The correct answer is: Utilities and rent

Fixed overhead costs in a contractor's budget typically include expenses that do not fluctuate with the level of production or project activity. Utilities and rent are classic examples of fixed overhead costs because they represent consistent, recurring expenses that the contractor must pay regardless of how many projects they are handling or the volume of work being completed. Utilities include services such as electricity and water, which are essential for maintaining operations but do not vary significantly based on output. Rent is another constant expense associated with physical space used for offices, storage, or equipment. These costs are crucial to running the business but are not tied directly to any specific project, making them a key aspect of fixed overhead. Other options like variable labor costs, material purchase costs, and direct project costs are not included in fixed overhead. Variable labor costs change based on the amount of work or number of projects—when more work is done, more labor might be needed. Material purchase costs vary with the project's requirements and budget, while direct project costs are specifically linked to the execution of individual projects. Therefore, these do not contribute to the contractor's fixed overhead costs.