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Fixed price Incentive fee

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nagarwal
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Joined: Sun Jun 22, 2014 8:34 am

Fixed price Incentive fee

Postby nagarwal Sat Aug 30, 2014 7:34 am

Question 32: Work has been completed on your Fixed Price Incentive Contract. The
original contract was for $55,000, of which $50,000 is target cost and $5,000 is target
profit. A share ratio of 50/50 has been agreed upon. The actual cost incurred on the
project is $48,000. How much is the final price?

A.) $54,000
B.) $55,000
C.) $56,000.
D.) $49,000.
signor_rk
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Re: Fixed price Incentive fee

Postby signor_rk Sat Aug 30, 2014 8:28 am

Option # A is chosen.
Here,
Actual cost incurred =$48,000 which is below the Target cost of $50,000 ; So , there is a saving in cost of $2,000. Target Profit=$5,000;
Final price = $48,000 + $5,000 + $2000*50%
= $54,000.
Regards ,

Ranjit

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