What does "overhead" mean in the context of construction?

In the context of construction, "overhead" refers specifically to the indirect costs that a business incurs in its operations that are not directly associated with a particular project. These costs generally include expenses like administrative salaries, rent, utilities, and office supplies necessary to maintain business operations. Understanding overhead is crucial for accurate estimating and budgeting because these costs must be allocated across all projects to ensure the overall financial health of the company.

Option A focuses exclusively on labor costs, which are direct costs tied to specific projects. Option C addresses profit margins, which are typically calculated after accounting for both direct and indirect costs but do not define overhead itself. Option D limits costs to materials, ignoring the broader scope of business operations that contribute to overhead. Thus, defining overhead as indirect costs provides a comprehensive understanding of the overall cost structure in the construction business.