Utah Contractor Practice Exam

Which of the following is classified as a direct cost in construction?

1. Payroll tax

2. Insurance

3. Personal vehicle

4. Computer use by employees

The correct answer is: Payroll tax

In construction, direct costs are expenses that can be directly attributed to a specific project. Payroll taxes are classified as direct costs because they are payments made to the government based on employee wages. These taxes are incurred specifically for the labor that is performed on a particular construction project. This means that they can be directly linked to the cost of labor that goes into the project. Other options such as insurance and personal vehicle costs are typically considered indirect costs. Insurance is often a flat expense that applies to the overall business operation rather than a specific project, while personal vehicle expenses might be related to project management activities but aren’t directly tied to a specific construction effort. Similarly, computer use by employees can also be categorized as an indirect cost because it relates to the general administrative expenses of running a construction business rather than being specifically associated with a single project.