What kinds of expenses are classified under Indirect Overhead?

Indirect overhead expenses are costs that cannot be directly attributed to a specific project or task, but are necessary for the overall operation of a business. These costs typically support the company's general functions and are often incurred even when no project is underway. The choice of office operations and staff-related costs falls under this category since it includes expenses like salaries, utilities, rent, office supplies, and administrative support that contribute to maintaining the business’s structure and function but do not directly relate to any one particular project.

In contrast, supplies for construction and payments to contractors are considered direct costs because they are specifically linked to a construction project or contract. Client entertainment costs may also be categorized differently, often depending on company policies or specific accounting practices, but they do not generally reflect the ongoing overhead support necessary for running the business consistently. Thus, the classification of office operations and staff-related costs as indirect overhead accurately reflects their role in supporting the business as a whole rather than any specific project.