Certified Professional Contract Manager (CPCM) 2026 – 400 Free Practice Questions to Pass the Exam

Indirect costs are expenses that cannot be attributed directly to a specific project or product but are necessary for the overall operation of the business. These costs typically support multiple projects or the entire organization rather than a single project or specific output.

Utilities for a factory fall into the category of indirect costs because they are essential services required to maintain the factory’s operations. These costs support all production efforts but cannot be specifically assigned to any one project or product. This makes them indirect, as they contribute to the overall environment in which direct work occurs but do not directly correlate with the output of a specific project or service.

In contrast, raw materials purchased and salaries paid to project-specific employees are considered direct costs because they can be directly associated with a specific project or production output. Shipping costs for delivered goods can also be viewed as direct costs since they are directly tied to the distribution of particular products or orders.