Costs related to the business of being a builder such as office rent, office staff, and insurances are best described as

• A. Direct costs
• B. Indirect costs
• C. Overhead costs
• D. Fixed costs

Answer: (B)

The main idea is distinguishing costs that can be tied to a specific job from those that support the business as a whole. Office rent, office staff wages, and general insurance aren’t linked to any single construction project; they’re incurred to keep the company running and to support all jobs. That makes them indirect costs, which are often grouped under overhead. Direct costs would be things like materials and labor that can be traced to one particular project. Overhead is a common way to describe these ongoing, business-wide expenses, but they’re categorized as indirect costs since they aren’t attributable to a single job.