A change order alters both the scope and the forecast. Before pricing it, bring the base job up to date: separate costs already incurred from open commitments and work that remains to be estimated. Then add the change's cost once. These figures are a fictional worked example, not a recommended quote.
Start with the revised job forecast
Assume a remodel has $23,000 in actual costs, $5,000 in open commitments, and $8,500 in remaining forecast costs. The expected base-job cost is $36,500. Approved revenue is $54,000. A requested scope change is estimated to add $4,000 in cost.
If the change is priced at $6,000, revised revenue becomes $60,000 and revised cost becomes $40,500. Gross profit is $19,500, and gross margin is $19,500 ÷ $60,000 = 32.5%.
| Measure | Calculation | Amount |
|---|---|---|
| Base-job forecast cost | $23,000 + $5,000 + $8,500 | $36,500 |
| Revised forecast cost | $36,500 + $4,000 | $40,500 |
| Revised approved revenue scenario | $54,000 + $6,000 | $60,000 |
| Scenario gross profit and margin | $60,000 − $40,500; $19,500 ÷ $60,000 | $19,500; 32.5% |
Two targets, two prices
For a standalone 30% margin on the $4,000 change, calculate $4,000 ÷ (1 − 0.30). The result is $5,714.285…, so a price rounded up to the cent is $5,714.29. This treats the new work as its own pricing decision.
For a 30% margin across the whole revised job, calculate the required total revenue first: $40,500 ÷ 0.70 = $57,857.142…. Rounded up to cents, that is $57,857.15. After subtracting the existing $54,000 approved revenue, the additional price needed in this scenario is $3,857.15.
The second figure is lower because the original estimate has a projected cushion. At that additional price, the $4,000 change is not independently earning a 30% margin; it uses $142.85 of the existing projected profit. The whole-job margin reaches 30% only if the base revenue and forecast costs hold. A change can consume more cushion when estimates, productivity, or commitments move.
A whole-job floor may draw on the cushion and is not a recommended quote. It is a scenario calculation for comparing consequences. Consider the changed scope, uncertainty, capacity, customer agreement, and your own pricing policy before deciding what to offer. Your chosen target is a business input, not a rate prescribed here.
Record scope before starting
Describe the added or removed work, its assumptions, price, schedule effect, and any dependencies in the form your contract process requires. Confirm approval before performing changed work. Do not treat a calculated scenario as authorization, a signed change, or collected revenue. For legal questions about contract terms, consult a qualified local professional.
Use the change order calculator to compare a standalone target with the revised-job scenario, or review the markup and margin formulas first. Examples are fictional. This guide is not tax, accounting, or legal advice.
Frequently asked questions
Why is the whole-job price lower than the standalone price?
The base job already has projected gross profit in this example. The whole-job scenario spends $142.85 of that cushion to bring the revised total to a 30% margin. The standalone calculation asks the change itself to meet 30%.
Which price should I quote?
The arithmetic does not choose a quote for you. Review the scope, current forecast, uncertainty, business target, and contract process. The whole-job floor can rely on a cushion that may disappear, so it is not a recommendation.
Is approved revenue the same as money collected?
No. Approval, invoicing, and payment are different states. Keep collected cash separate from approved contract value when managing a job.