There is nothing universal about how they do it. Any individual contractor will charge the way he sees fit to cover his expenses. If he is into remodeling where the contractor/homeowner supplies the fixtures, his labor and installation items have to cover the expenses. If he is supplying everything, he may, or may not, give a discount on the labor and cover the difference in the fixture cost. Or he may just charge the normal fees and make a greater profit. No contractor will tell you HOW he is charging if it is a fixed price bid, so your only way to tell if you are getting a bargain is to get multiple bids and hope the one you pick did not make an error and has to cut corners to break even.