Which of the following is a non-labor direct cost?

Which of the following is a non-labor direct cost?

• A. Materials
• B. Payroll taxes
• C. Wages
• D. Equipment rental

Answer: (D)

The main idea here is how costs are categorized by whether they involve labor and whether they can be traced directly to a specific project. A non-labor direct cost is a cost that is directly attributable to the project but is not a payment for workers. Wages and payroll taxes are clearly labor costs because they are compensation to employees. Equipment rental, however, is a direct project expense used to perform the work but not payroll—it's the cost of using a tool or machine on site. Materials are also used directly on a project, but in many cost classifications they’re treated as direct materials rather than the broader “non-labor direct cost” category. So the best example of a non-labor direct cost among the options is equipment rental.

The main idea here is how costs are categorized by whether they involve labor and whether they can be traced directly to a specific project. A non-labor direct cost is a cost that is directly attributable to the project but is not a payment for workers. Wages and payroll taxes are clearly labor costs because they are compensation to employees. Equipment rental, however, is a direct project expense used to perform the work but not payroll—it's the cost of using a tool or machine on site. Materials are also used directly on a project, but in many cost classifications they’re treated as direct materials rather than the broader “non-labor direct cost” category. So the best example of a non-labor direct cost among the options is equipment rental.