On a time-and-materials job, you should:

On a time-and-materials job, you should:

• A. Bill only for labor
• B. Add profit and overhead to labor and materials
• C. Charge a fixed fee
• D. Use a fixed-price formula

Answer: (B)

In time-and-materials pricing, you bill for the actual time spent and the actual materials used, and you also include a markup to cover overhead and earn a profit. The best approach is to add profit and overhead to both labor and materials, so the business recovers its direct costs plus the costs of running the operation. For example, if labor costs $600 and materials cost $100, applying a 25% combined markup for overhead and profit would yield about $750 for labor and $125 for materials, totaling $875. This differs from charging a fixed fee or using a fixed-price formula, which are separate contract methods not tied to actual time and materials.

In time-and-materials pricing, you bill for the actual time spent and the actual materials used, and you also include a markup to cover overhead and earn a profit. The best approach is to add profit and overhead to both labor and materials, so the business recovers its direct costs plus the costs of running the operation. For example, if labor costs $600 and materials cost $100, applying a 25% combined markup for overhead and profit would yield about $750 for labor and $125 for materials, totaling $875. This differs from charging a fixed fee or using a fixed-price formula, which are separate contract methods not tied to actual time and materials.