California Real Estate Practice Exam

In the construction of a building, there are several indirect costs involved, one of which is:

1. Building permit fees

2. Labor costs

3. Material costs

4. Subcontracts

The correct answer is: Building permit fees

In the context of building construction, indirect costs refer to expenses that are not directly tied to a specific project but are necessary for the overall completion and operation of the building. Building permit fees are a prime example of an indirect cost, as they are required for legal compliance and are incurred regardless of the specifics of construction activities. Labor costs and material costs, on the other hand, are considered direct costs because they can be directly attributed to the specific labor and materials used in the construction project. Subcontracts also fall under direct costs because these are costs associated with hiring specific contractors or subcontractors for particular tasks related to the project. Thus, the correct identification of building permit fees as an indirect cost highlights their essential but non-specific role in the overall construction process.