Contracts & ExecutionQuestion 169 of 1632
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, an unfavorable variance
b.A contingency allowance built into the bid
c.A retention withheld from progress pay
d.Liquidated damages for finishing late
Explanation
Actual labor above the estimate is a cost overrun, also called an unfavorable variance; job costing surfaces it so the contractor can find the cause. A contingency allowance is money carried in the bid before the work starts, not a difference discovered after it. Retention is a percentage the owner holds back from progress payments until the work is accepted. Liquidated damages are a per-day sum the contract fixes for late completion.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)