Overhead costs in construction project
Hi all,
Was just wondering if overhead costs like indirect labor ( Office admin staff's salary) and office rental, utilities needs to be considered in project cost estimation for construction projects.
I rmb learning back in school that for project costing, only incremental cash flows need to be considered. For this case, whether or not the project is taken up, rental and salaries of office staff still needs to be paid and are not considered incremental cashflows so do not need to be taken into account.
However in the real world this does not seem to make sense as the revenues we are getting from a particular project still needs to be able to cover those fixed costs and not just the variable costs such as direct labour and materials.
Need some help and advice here