Business FinancesQuestion 1203 of 1632
A contractor pays $1,200/month for general liability insurance and $2,000/month office rent. These are examples of:
a.Direct job costs
b.Variable costs that change with each job
c.Sales tax
d.Fixed overhead costs
Explanation
Both are overhead: they recur regardless of which jobs are underway and cannot be charged to any single project, so they must be recovered through the markup applied to jobs. (In practice a general liability premium is often rated on payroll or gross receipts and audited at year end, so the total does move with volume — but it stays overhead, because the test is whether a cost can be assigned to one job, not whether it ever changes.)
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)