Which item is a direct cost when bidding on a job?

Which item is a direct cost when bidding on a job?

• A. Performance bond
• B. Insurance fronting
• C. Advertising
• D. Administrative salaries

Answer: (A)

Direct costs are those you can trace specifically to a single project and include in the bid price to cover that job. The cost of obtaining a performance bond is tied to this particular contract, so it directly affects what you quote for that job and is included as a direct cost in the bid. Advertising is a general marketing expense not linked to any one project, so it’s treated as overhead. Administrative salaries are ongoing business expenses that support the whole firm, not costs tied to completing this specific job, so they’re also considered indirect. Insurance fronting is a risk-management expense that isn’t unique to the job’s execution, so it isn’t a direct cost either.

Direct costs are those you can trace specifically to a single project and include in the bid price to cover that job. The cost of obtaining a performance bond is tied to this particular contract, so it directly affects what you quote for that job and is included as a direct cost in the bid.

Advertising is a general marketing expense not linked to any one project, so it’s treated as overhead. Administrative salaries are ongoing business expenses that support the whole firm, not costs tied to completing this specific job, so they’re also considered indirect. Insurance fronting is a risk-management expense that isn’t unique to the job’s execution, so it isn’t a direct cost either.