What type of costs are overhead and profit classified as?

Overhead and profit are classified as indirect costs because they cannot be directly attributed to a specific product or project. Indirect costs are expenses that support the overall operation but are not tied to a single unit of output, such as the costs of utilities, administrative salaries, and other operational expenses.

In the context of mass appraising, understanding direct versus indirect costs is crucial for accurately determining property values. Direct costs, on the other hand, are expenses that can be directly linked to the construction or renovation of a building, such as materials and labor. Replacement costs refer to the current cost of replacing an asset with a new asset of similar kind, while reproduction costs are the costs incurred to replicate an asset exactly. Thus, recognizing overhead and profit as indirect costs allows for a clearer understanding of how costs impact overall appraisal and valuation methods.