Estimating Practice Exam

A stipulated sum of money to be expended by a contractor on a specific work item on a project is usually referred to as a ____.

1. Cost breakdown

2. Cash allowance

3. Project budget

4. Expense report

The correct answer is: Cash allowance

The correct term for a stipulated sum of money allocated for a specific work item on a project is commonly known as a cash allowance. This amount is set aside to cover costs associated with particular parts of a project that may not have been fully determined during the initial budgeting phase. Cash allowances are often used for items like materials, equipment, or labor that can vary in cost. The inclusion of cash allowances in a contract helps manage uncertainties by giving contractors a flexible budget space for these specific portions. This allows the project to progress without delays while the exact costs are finalized, facilitating smoother project management and financial planning. In contrast, a cost breakdown refers to a detailed itemization of costs associated with a project, a project budget encompasses all the costs needed for an entire project, and an expense report is a document submitted for reimbursement purposes that details individual expenses incurred by a contractor or employee. These terms do not specifically denote a sum set aside for a particular work item within a project as effectively as cash allowance does.