Virginia Contractor General Practice Test

What expenses are typically included in the calculation of Project Overhead?

1. Raw materials

2. Labor costs

3. Supervisor salaries

4. Office rent

The correct answer is: Supervisor salaries

Project overhead encompasses the indirect costs associated with supervising and managing a construction project. These costs are not tied directly to specific tasks, materials, or labor on the project but are essential for its overall administration and success. Supervisor salaries are a key component of project overhead because they represent the expense of personnel who oversee project operations, ensure compliance with safety regulations, coordinate between different trades, and manage day-to-day activities. Their salaries do not correspond to a direct output like raw materials or labor but are crucial for maintaining project efficiency and effectiveness. While other choices like raw materials and labor costs are considered direct project costs, office rent is also more aligned with general operating expenses rather than specific project overhead. Overall, supervisor salaries specifically relate directly to the management aspect of a project, making them a fundamental component of project overhead costs.