Estimating Practice Exam

What are general expenses called that cannot be priced until the overall project price is determined?

1. Fixed costs

2. Add-ons

3. Variable costs

4. Overhead

The correct answer is: Add-ons

General expenses that cannot be priced until the overall project price is determined are known as overhead. Overhead costs are typically indirect expenses that are necessary to run a project but are not directly tied to a specific task or product. These can include administrative expenses, utilities, and office supplies. Since overhead costs are not directly attributable to a specific job or project phase, they often require a comprehensive understanding of the overall project budget to accurately estimate. In project estimation practices, it is crucial to have a clear idea of overhead costs when forming an estimate for a project as they contribute to the total cost framework. This understanding helps ensure that all necessary expenses are accounted for when determining a project's financial feasibility and pricing strategy. Establishing an overall project price first allows project managers to allocate and manage overhead costs effectively.