In California, when calculating overhead costs for a construction bid, which of the following would be considered direct overhead costs that can be allocated to a specific project?
Correct Answer
A) Project manager salary and temporary site facilities
Direct overhead costs are project-specific expenses that can be directly attributed to a particular job, such as project manager salaries and temporary site facilities. General office expenses, corporate insurance, and marketing costs are indirect overhead that must be allocated across all projects through overhead percentage calculations.
Why This Is the Correct Answer
Direct overhead (also called 'job overhead' or 'project overhead') consists of costs that are incurred specifically for and can be directly attributed to a single project. Project manager salaries assigned to that job and temporary site facilities (site trailer, portable toilets, temporary fencing, etc.) are classic examples of direct overhead — they exist because of that project and disappear when the project ends. These costs appear in the project's budget, not in the company's general overhead pool.
Why the Other Options Are Wrong
Option B: Corporate insurance premiums and accounting fees
Corporate insurance premiums and accounting fees are indirect (general) overhead — they support the entire company, not any single project. These costs must be spread across all projects using an overhead allocation rate (typically a percentage of direct costs or labor). They cannot be directly assigned to one job.
Option C: General office rent and administrative salaries
General office rent and administrative salaries are indirect overhead. The office serves all projects simultaneously, and administrative staff (bookkeepers, receptionists, etc.) do not work exclusively on one project. These costs are pooled and allocated across all work.
Option D: Marketing expenses and business development costs
Marketing expenses and business development costs are indirect overhead with no direct tie to any specific project. These costs are incurred to generate future work, not to execute a current project, and must be spread across the company's overhead rate.
Memory Technique
Direct overhead = costs that pack up and leave when the project is done (project manager, site trailer, temporary utilities). Indirect overhead = costs that stay at the office regardless of what projects are active.
More law-business Questions
Under B&P Code Section 7071.9, a contractor may deposit cash or securities instead of obtaining a surety bond. If a contractor chooses this option, where must the deposit be maintained and what happens to interest earned?
Under California's AB 5 law (Dynamex decision), which factor is NOT part of the ABC test for determining independent contractor status?
According to Business and Professions Code Section 7031, what is required when a licensed contractor supervises work performed by unlicensed employees on a construction project?
Under California Building Standards Code Title 24, which entity has the authority to issue building permits for most residential and commercial construction projects?
According to B&P Code 7159.5, service and repair contracts must include specific provisions. Which statement is correct regarding these contracts?
Which of the following activities is exempt from California contractor licensing requirements under Business and Professions Code Section 7048?
Under Cal/OSHA regulations in Title 8 CCR Section 5192, Safety Data Sheets (SDS) for hazardous chemicals used on construction sites must be readily accessible to employees during which hours?
Under California Business and Professions Code Section 7071.9, in lieu of a surety bond, what alternative security may a contractor provide to satisfy the contractor license bond requirement?
According to Cal/OSHA regulations, which of the following is NOT a required element of a written Injury and Illness Prevention Program (IIPP)?
A homeowner requests that a B-General Building Contractor provide a certificate of insurance naming the homeowner as an additional insured on the contractor's general liability policy. Under California law, what is the contractor's obligation?
People Also Study
Business & Financial Management
120 questions · 70% to pass
Contract Administration
60 questions · 70% to pass
Project Management
60 questions · 70% to pass
Related Study Resources
Previous Question
In California, if a general contractor discovers that work performed by a subcontractor does not meet code requirements during a scheduled inspection, what is the contractor's primary legal obligation?
Next Question
A qualifying individual for a contractor's license who is replaced or removed must have their bond of what amount filed with the CSLB according to Business and Professions Code Section 7071.8?