Contractor License Practice Exam

What are temporary storage facilities and dumpsters considered in terms of project costs?

1. Fixed overhead

2. Project overhead

3. Variable costs

4. Direct project costs

The correct answer is: Project overhead

Temporary storage facilities and dumpsters fall under the category of project overhead. This is because they are essential for the execution of a project but do not directly relate to the final product or service being provided. Project overhead encompasses all the costs that are necessary for a project to run efficiently but are not tied directly to a specific task or output. For instance, while the materials and labor involve direct costs aimed at completing the project, the expenses related to temporary storage and waste management are considered indirect costs that support the project as a whole. They are necessary for maintaining the working environment and facilitating operations, which is why they are categorized as overhead. In contrast, fixed overhead refers to costs that remain constant regardless of the level of activity or output. Variable costs fluctuate with the level of activity, such as fuel or materials that depend on usage. Direct project costs are specifically tied to individual project activities and would not typically include storage solutions or dumpsters. Thus, these items are best categorized as project overhead.