What would be the expected projected gain/loss for a cost code if a $100 change order was approved and 100% of it was subcontractor costs?

In this scenario, understanding the financial implications of a change order is crucial. A $100 change order approved with all subcontractor costs implies that the project incurs additional expenses directly associated with the subcontracted work.

Typically, a change order not only accounts for the direct cost of the subcontractor but may also impact the overall project cost structure, which could include overhead and profit margins. Assuming a standard markup of 13% in this case, the actual expense incurred would be higher than the change order amount. The additional cost from such a markup would lead to a projected loss.

If 100% of the change order is considered a subcontractor cost, the overall expense would effectively be $100 for the subcontractor work plus a 13% markup, bringing the total to $113. Therefore, when evaluating the expected gain/loss for that cost code, the project would show a loss of $13, which is the difference between the cost incurred ($113) and the change order amount ($100). Hence, this results in a projected loss for that cost code of ($13).

In this manner, recognizing how change orders interact with project finances and how they are calculated is key to grasping the overall impact on budget and financial reporting within construction projects