Jim, as Steve and Henry stated, yes, markups are put on items as "standard practice." What I'm in strong disagreement with is how this was done.
If the builder was going to glean his profit from out of the $2500 allowance, then he should have told you your allowance was (roughly) $2210. Personally, I feel this was misleading if it's not described in your contract.
Your builder deserves to make a profit, but he needs to work on how he writes his contracts up so that it is made clear where he's getting it from.
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