Business FinancesQuestion 308 of 1605
Including a contingency line item in a project budget is intended to:
a.Replace the contractor's profit margin
b.Avoid paying payroll taxes on the job
c.Increase the retention withheld by the owner
d.Provide a financial reserve for unforeseen costs
Explanation
A contingency is a budgeted reserve set aside to cover unexpected conditions, scope surprises, or estimating errors. It is not profit and is not intended to be spent unless an unforeseen cost arises.
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Related questions on this topic
- A contractor's fixed monthly costs total $18,000 and variable costs run 60% of revenue. What monthly revenue is needed to break even?
- On a $150,000 contract, the owner withholds 10% retention from each progress payment. After all work is billed, how much money is being held as retention?
- Why does retention (retainage) create a cash-flow challenge for a contractor?
- Which of the following is a VARIABLE cost that rises and falls with the volume of construction work performed?
- Job costing is BEST described as a system that:
- Which of the following would be classified as a DIRECT cost on a specific project's job cost report?
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)