Which of the following is an example of an indirect cost?

Which of the following is an example of an indirect cost?

• A. Cost of safety equipment
• B. Loss of productivity due to crew breakup
• C. Replacement costs for defective materials
• D. Payroll for direct labor

Answer: (B)

Indirect costs are expenses that cannot be directly attributed to a specific project or task but are essential for overall operations. In this case, loss of productivity due to crew breakup is considered an indirect cost because it does not directly correlate with a specific output or task. Instead, it affects the overall efficiency and effectiveness of the workforce, leading to potential financial losses without being tied to a tangible item or service. On the other hand, the costs of safety equipment, replacement costs for defective materials, and payroll for direct labor are all classified as direct costs. These expenses can be traced directly to specific activities or projects, making them more straightforward in their association with expenditures in a construction setting.

Indirect costs are expenses that cannot be directly attributed to a specific project or task but are essential for overall operations. In this case, loss of productivity due to crew breakup is considered an indirect cost because it does not directly correlate with a specific output or task. Instead, it affects the overall efficiency and effectiveness of the workforce, leading to potential financial losses without being tied to a tangible item or service.

On the other hand, the costs of safety equipment, replacement costs for defective materials, and payroll for direct labor are all classified as direct costs. These expenses can be traced directly to specific activities or projects, making them more straightforward in their association with expenditures in a construction setting.