MHIC NASCLA Contractors Practice Exam

Which costs are considered project overhead?

1. Material and labor costs

2. Taxes and office costs

3. Heavy equipment rental

4. Subcontractor fees

The correct answer is: Taxes and office costs

Project overhead refers to the indirect costs associated with running a construction project that are not directly tied to a specific task or product. These costs support the overall operation and management of the project. In this context, taxes and office costs embody the essence of project overhead. Taxes may include sales tax on materials, payroll taxes associated with employees, or property taxes for equipment and facilities used in the project. Office costs encompass expenses such as utilities, office supplies, communications, and other administrative expenses necessary for project management but not directly linked to any construction activity. On the other hand, material and labor costs are considered direct costs, as they can be directly attributed to the production of a project. Heavy equipment rental is also seen as a direct cost since it pertains to the specific tools needed for a project task. Similarly, subcontractor fees are categorized as direct costs, as these are expenses paid for particular services rendered on the project, directly contributing to its completion.