Certified Texas Contract Manager Practice Exam

Which type of cost is included in a contract but is not specific to the project?

1. Direct Cost

2. Variable Cost

3. Indirect Cost

4. Fixed Cost

The correct answer is: Indirect Cost

The correct choice focuses on indirect costs, which are expenses not directly attributable to a specific project, contract, or product. These costs are incurred to support the overall operations of the organization and often benefit multiple projects simultaneously. Examples include administrative salaries, utilities, and office supplies. In contrast, direct costs can be traced directly to a specific project or service, while variable costs fluctuate with the level of activity or production volume. Fixed costs remain constant regardless of activity levels. Therefore, indirect costs are the ones that align with the idea of being included in a contract without being specific to a singular project, as they are necessary for the overall functioning of an organization rather than tied to the deliverables of a particular contract.