Which cost represents expenses that are fixed irrespective of the project completion?

Which cost represents expenses that are fixed irrespective of the project completion?

• A. Overhead cost
• B. Direct labor cost
• C. Variable cost
• D. Material cost

Answer: (A)

Overhead costs are expenses that are necessary to run a business but do not fluctuate with the level of activity or project completion. These costs encompass a wide range of expenditures that occur regardless of whether specific projects are ongoing or completed. Common examples of overhead costs include rent for office space, utilities, salaries of administrative staff, and insurance. In contrast, direct labor costs vary based on the amount of labor applied to specific projects. Variable costs, by definition, change in direct proportion to the project's activity levels, such as materials used or labor hours worked. Material costs, similar to direct labor, will also fluctuate depending on project demands. Therefore, overhead costs stand out as the most fitting representation of expenses that remain constant no matter the status of project progress.

Overhead costs are expenses that are necessary to run a business but do not fluctuate with the level of activity or project completion. These costs encompass a wide range of expenditures that occur regardless of whether specific projects are ongoing or completed. Common examples of overhead costs include rent for office space, utilities, salaries of administrative staff, and insurance.

In contrast, direct labor costs vary based on the amount of labor applied to specific projects. Variable costs, by definition, change in direct proportion to the project's activity levels, such as materials used or labor hours worked. Material costs, similar to direct labor, will also fluctuate depending on project demands. Therefore, overhead costs stand out as the most fitting representation of expenses that remain constant no matter the status of project progress.