Direct expenses in construction of an improvement:

• A. Building permit
• B. Insurance costs
• C. Taxes
• D. Labor cost, material cost, and any subcontract

Answer: (D)

Direct expenses are the costs that can be traced straight to building the improvement. They include the actual work and materials used for the project: the labor paid to workers, the costs of materials, and payments to any subcontractors who perform parts of the construction. These costs vary with the scope of the project and become part of the construction cost itself.

Building permits, insurance costs, and taxes are generally treated as indirect costs or overhead. They support the project but aren’t tied to specific construction activities or quantities, so they aren’t considered direct expenses for the construction of this improvement.