Overhead is not charged, it is recovered. And you don’t make any money until you recover your overhead. You can make money on every job and still lose money as a contractor. That’s where job costing can help, by taking the original cost estimates from a job and comparing them with actual costs. This has to be done with every line item. When certain overhead costs are not allocated, job profits are used to pay for the unrecovered overhead. To avoid this, prebudgeting is needed. Ask yourself these three questions with each line item in order to properly allocate job costs.

Learn more about estimating strategies from Charles Vander Kooi in MO41 Estimating Part I: Strategies to Determine Labor, Equipment and Profit.