Is the annual payroll considered direct expense? I thought annual payroll is salary which is base expense that combines direct + indirect expenses. I got the answer wrong thinking I had to subtract the given annual overhead from annual payroll to get the direct expenses.
Hi @sarahf.hasan - I think you’re talking about a question on our PcM section 2 quiz where you’re provided with payroll, overhead, a profit target percentage, and asked to calculate an hourly billable rate. If you’re referring to a different question please let me know - the order of our questions is always randomized so I’m not sure which question was #3 when you took our quiz. It’s best to use the item ID (5-digit number located on the lower right hand portion of the screen) so I can quickly find the question.
Anyway, annual payroll is total labor - it includes both direct and indirect expenses. You shouldn’t subtract the provided overhead cost from payroll because there are plenty of other overhead items (like office rent, insurance, etc.) that aren’t indirect labor.
I hope this was helpful and good luck on your next exam!