What do indirect costs generally include?

Indirect costs typically refer to expenses that are not directly attributable to a specific project or activity but are necessary for the overall operation. These costs support the infrastructure needed to carry out direct activities.

Taxes and permits fall under this category because they are essential for compliance with local regulations and laws but do not directly relate to the production or delivery of a specific product or service. They are costs incurred as part of maintaining the operational capacity and legality of a business or project.

On the other hand, labor and materials are classified as direct costs since they can be directly linked to a specific project. Real estate commissions usually relate to transactional costs in property sales but are also directly tied to a transaction rather than the overall operational structure. Construction contracts often encompass direct costs associated with specific building projects. Thus, the nature of indirect costs inherently includes recurring expenses like taxes and permits that provide a necessary backdrop for business functioning.