Utah Contractor Practice Exam

Which of the following is NOT considered a Company Overhead expense?

1. Office rent

2. Taxes

3. Legal fees

4. Independent contractors

The correct answer is: Independent contractors

In a business context, Company Overhead expenses typically refer to the ongoing costs of operating a business that are not directly tied to the production of goods or services. These costs are necessary for maintaining the overall operation of the business but do not vary with production levels. Office rent, taxes, and legal fees are all examples of fixed expenses that a company incurs regardless of how many projects or services they complete. Office rent represents the cost of maintaining a physical space for operations, taxes are a legal obligation that a business must manage regularly, and legal fees are expenses incurred for legal consultations or representation necessary for compliance and business operations. Independent contractors, on the other hand, usually fall under direct expenses because they are often contracted to complete specific tasks or projects. Their costs can vary significantly with the workload and are typically aligned with specific project contracts rather than being a fixed overhead cost. This differentiation is key in understanding financial management within a construction or contracting business.