California Real Estate Practice Exam

Which cost in the construction of a building would be considered an indirect cost?

1. Architect's fees

2. Labor costs

3. Material costs

4. Subcontractor fees

The correct answer is: Architect's fees

In the context of construction, indirect costs refer to expenses that are not directly tied to a specific project or activity but are essential for the overall functioning and completion of a project. Architect's fees fall into this category because they represent costs associated with design, planning, and oversight, rather than the physical construction itself. While labor costs, material costs, and subcontractor fees are all direct costs that can be easily attributed to specific tasks or elements of a building project, architect's fees encompass a broader scope of services that support the project as a whole. These fees are incurred regardless of the specific materials or labor used in the construction process, making them part of the indirect costs. Thus, when considering which costs are considered indirect, architect's fees are the correct choice.