Material Allowance:  You are given an allowance of select lighting fixtures of $2500.00 at the time the contract was signed because the exact list of fixtures was not known.  You will purchase fixtures with your allowance dollars at our trade pricing.  If you go over the allowance, you will pay the extra amount plus overhead plus profit.  If you are under the allowance, you will receive a credit.  There is no refund for the overhead and profit on allowance credits.

Labor Allowance:  Perhaps the scope of labor for a particular task is unknown.  For Example, we expect to find some framing damage around a bathtub because existing tile is loose before we begin.  It is very likely there will be some repair but we do not know exactly how long it will take so we allow a certain number of man hours.  The hours are tracked and an adjustment is made of the current hourly rate (which includes overhead and profit).

Material and Labor Allowance: You have decided to install ceramic tile in your new bathroom but have not selected the tile yet.  Tile labor cost varies greatly with the type of tile selected so both material and labor must fall under the allowance.  This type of allowance is very similar to a change order.  The material is calculated based on your final selections; overhead and profit is added to the material and then the labor is estimated and added at the current hourly rate.  If you are under the allowance, you get a material credit and if you are over you receive a net charge.