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_______ charges include general office expenses, rent rates of lightning and heating, depreciation of furniture and office equipment.
1. Profit purchase system
2. Time value
3. Contingency
4. Overhead

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Correct Answer - Option 4 : Overhead

Concept:

For making any estimate workable, additional expenses are to be added.

The followings are the additional expanses which are to be considered during estimates:

  1. Extra Expenses (contingencies) – 3 to 5%
  2. Contract work establishments – 1.5 to 2%
  3. Tools and Machinery – 1 to 1.5%
  4. Contractor’s profit – 10%
  5. Departmental Profit – 10 to 15%


During rate analysis, overhead charges such as office rent, furniture and appliances charges, staff salaries and wages, service charges and other contingencies are included in the analysis.

These charges usually weigh around 2.5 to 5 % of the overall cost.

Solution:

Overhead charges include general office expenses, rent rates of lightning and heating, depreciation of furniture and office equipment.

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