An allowance is a way of assigning a dollar amount to an unknown item.  For example, let’s say that your bathroom is going to have a tile on the floor and in the shower.  You probably won’t know exactly what that tile selection will be at the start of the project.  A contractor will provide an allowance to cover the cost of that tile.  The contractor should have an understanding of what your general aesthetic is and price accordingly.  If that allowance for tile is too low, and you select a more expensive tile, the number will be adjusted up.  Using low numbers for an allowance can make an overall estimate look artificially low.  Be sure you understand and ask questions about allowance items…especially if they look comparatively high or low.