Contracts & ExecutionQuestion 169 of 1605
A job was estimated at $40,000 in labor but actual labor came in at $48,000. This $8,000 difference is BEST described as:
a.A cost overrun (unfavorable variance)
b.A contingency allowance
c.A retention amount
d.Liquidated damages
Explanation
When actual cost exceeds the estimate, the shortfall is a cost overrun, also called an unfavorable variance. Job costing flags such variances so the contractor can investigate the cause.
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