Contractor License Practice Exam

Which of the following is not considered annual company overhead?

1. Employee salaries

2. Office supplies

3. Equipment rental

4. Utilities

The correct answer is: Equipment rental

Annual company overhead refers to the ongoing costs that are necessary to run a business but are not directly tied to the production of goods or services. These costs are typically fixed and recur regardless of the level of production or sales. The correct answer identifies equipment rental as not being considered annual company overhead. Equipment rental is usually classified as a variable cost, as it can fluctuate based on how much equipment is used or whether it is needed for specific projects. Unlike salaries, office supplies, and utilities—which are more stable and recurring expenses—equipment rental expenses can vary most significantly depending on project demands and can be incurred only during specific projects or times of the year. Employee salaries are typically a fixed expense that the company incurs regardless of the amount of work being performed, while office supplies and utilities are recurring costs that contribute consistently to the overhead of maintaining office operations.