Local Road Management Manual 214 particular accounting standpoint as having been incurred in the performance of a specific activity standard. Direct cost elements of each pay item basically involve the following: i. Equipment Cost. These costs may be computed based on latest Edition of ACEL rates or prevailing LGU equipment rental rates, whichever is applicable. The Chapter on Quantity Calculations and Cost Estimation shows construction equipment rental rates using ACEL 2009; ii. Material Cost (including Hauling). LGUs may use the prevailing market rates of materials in their area in computing the material cost; and iii. Labor Cost. The latest minimum wage law updated 8 July 2011 as approved by the National Wages and Productivity Commission should be adapted in the labor cost estimate, which include fringe benefits such as leaves, bonus, Social Security System, Philhealth, Emergency Cost of Living Allowance, PagIBIG, 13th month pay and employees compensation. The Chapter on Quantity Calculations and Cost Estimation shows a sample computation of labor rates. b. Indirect Costs. These costs are mark-ups and value added tax (VAT) that are not directly involved in the execution of the work items. Indirect cost should be computed in accordance with the DPWH latest issuances as much as possible. It is usually taken as a percentage of the estimated direct costs to cover up among other things, expenses that are incurred in the completion of the works, which include, but are not necessarily limited to the following: i. Overhead Expenses: • Supervision (Engineering and Administrative); • Transportation Allowances; • Office Expenses (Office Equipment and Supplies); • Contractor’s All Risk Insurance; and • Financing Cost (Premium). ii. Mobilization/Demobilization; iii. Contingencies;