Utah Contractor Practice Exam

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Which of these is classified as a job-related direct cost?

Trade Association membership
Contractor's license fee
Performance bond
Office rent

The correct answer is: Performance bond

A performance bond is classified as a job-related direct cost because it is a financial guarantee that protects the project owner against contractor defaults. When a contractor is awarded a project, they may be required to obtain a performance bond to ensure that they will complete the job as specified in the contract. This bond is necessary specifically for the project at hand, making it a direct cost associated with that job. In contrast, a trade association membership and a contractor’s license fee are considered indirect costs, as they do not relate specifically to a particular job but rather to the overall operations of the business. Similarly, office rent is an indirect expense related to maintaining a physical location for business activities and is not directly tied to individual projects. Thus, these options do not classify as direct job-related costs.