Utah Contractor Practice Exam

Which of these is considered a project overhead cost?

1. Hourly wages

2. Heat and air conditioning

3. Salary wages

4. All of the above

The correct answer is: Heat and air conditioning

Project overhead costs refer to the expenses that cannot be directly attributed to a specific project activity but are necessary for the operation of the project. These costs are typically indirect and support the overall execution of the project rather than being tied directly to labor or materials. Heat and air conditioning are prime examples of overhead costs because they are necessary for maintaining a conducive working environment for staff and workers on the project site. These expenses do not vary directly with the level of output or the amount of work done; instead, they are incurred to ensure that the project can proceed under suitable conditions. In contrast, hourly wages and salary wages represent direct costs related to labor on the project. These costs are tied directly to the personnel performing work on the project and fluctuate with the amount of work completed or the hours billed. Therefore, while they are significant costs associated with a project, they do not fall under the category of overhead costs. In summary, heat and air conditioning represents project overhead cost as it contributes to the overall function of the work environment without being directly tied to tasks or labor performed.