Florida General Contractor Practice Exam

Which of the following is considered a fixed overhead expense?

1. Variable labor costs

2. Utilities

3. Rent for office space

4. Materials supply costs

The correct answer is: Rent for office space

A fixed overhead expense is a cost that does not fluctuate with the level of production or the volume of projects a contractor undertakes. These expenses are typically recurring and remain constant irrespective of the company’s operational activity levels. Rent for office space fits this definition perfectly. It is a regular, fixed payment that does not change month over month, regardless of how many projects are being managed or completed. Office space rent is a standard overhead cost that businesses must account for, as it is necessary for maintaining operations and supporting the workforce. In contrast, the other options represent costs that are not fixed overhead expenses. Variable labor costs are directly tied to the amount of work being done and fluctuate based on the level of project activity. Utilities, while often consistent, can vary from month to month based on usage, making them semi-variable rather than fixed. Materials supply costs are also directly correlated with specific projects and can vary greatly depending on project requirements and scopes. Therefore, these do not align with the characteristics of fixed overhead expenses.