Including a contingency line item in a project budget is intended to:
Explanation
A contingency is a budgeted reserve for site conditions, small scope surprises and ordinary estimating error, and it is spent only when one of those arises; what is left belongs to the job's result. It is not profit, and treating it as profit means the risk has been priced once and collected twice. Payroll taxes are owed on wages whatever the budget says. And retention is set by the contract and withheld by the owner, so nothing in the contractor's own budget can change it.
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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 5% 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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