Arizona Contractors License Practice Exam

What does project overhead typically include?

1. Salaries of site workers

2. Items necessary for project completion

3. Raw materials for construction

4. Interest on loans for the project

The correct answer is: Items necessary for project completion

Project overhead includes expenses necessary for the overall functioning and management of the project that are not directly associated with specific activities or tasks. This can encompass costs such as general administrative expenses, utilities, insurance, and other operational costs required to keep the project running efficiently. In the context of the answer provided, items necessary for project completion can involve items that support the project but are not directly linked to the labor or materials utilized on-site. This distinguishes these costs from the more direct expenses of salaries, raw materials, or interest on loans, which are categorized differently in project accounting. Thus, understanding project overhead is essential for effectively budgeting and managing a construction project, ensuring that all necessary but indirect costs are accounted for.