Which of the following are considered as direct costs in a construction company? Select TWO op-tions

Which of the following are considered as direct costs in a construction company? Select TWO op-tions
A . Raw materials
B. An employee is hired to work on a project, either exclusively or for an assigned number of hours
C. The materials and supplies needed for the company’s day-to-day operations.
D. Advertising and marketing communication
E. Clerical assistants who maintain the office

View Answer

Answer: A,B

Explanation:

Direct costs are directly associated with the production of a good or service. In this question, ‘An employee is hired to work on a project, either exclusively or for an assigned number of hours’ and ‘Raw materials’ are directly related to producing the product. Indirect costs are the general costs of the organisation – these costs cannot easily be attributed to specific products or services (also known as overheads). ‘The materials and supplies needed for the company’s day-to-day operations’ or ‘Clerical assistants who maintain the office’ or ‘Advertising and marketing communication’ is example of indirect cost.

Reference: CIPS study guide page 25-26

LO 1, AC 1.2