Costs related to building a home such as materials, rented equipment, and labor costs are best described as

• A. Direct costs
• B. Indirect costs
• C. Administrative costs
• D. Marketing costs

Answer: (A)

Direct costs are those you can clearly trace to a specific job. In building a home, materials like lumber, concrete, and nails, along with labor and equipment rented for that on-site work, are spent directly to complete that particular house. You can assign every dollar of these items to this project, so they behave as direct costs. Indirect costs are overhead that supports multiple projects and isn’t easily linked to one job—things like site supervision salaries, utilities, or shared equipment. Administrative costs and marketing costs are general overhead or selling expenses, not the day-to-day construction resources tied to one home. So the described costs are direct costs.