Contracts & ExecutionQuestion 193 of 1632
A contractor's overhead is best described as:
a.The direct labor and material charged to one specific job
b.Indirect business costs not charged to one specific job
c.The markup added to direct costs to produce the profit
d.The retention the owner withholds until completion
Explanation
Overhead is the indirect cost of running the business - office rent, insurance, licenses, administrative salaries - that no single job carries and that has to be recovered through markup on direct costs. Labor and material charged to one job are direct job costs. The markup is how overhead is recovered, not the overhead itself. And retention is money the owner holds back from a payment, not a cost of doing business.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)