CSM Forum Banner

Help with this question

Discuss PMP doubts, tips and lesson learned. iZenBridge makes PMP® Certification easy
coolpmp69
Contributor
Contributor
Posts: 282
Joined: Mon Nov 17, 2014 8:55 pm

Help with this question

Postby coolpmp69 Fri Nov 21, 2014 3:38 pm

I found the below question on one of the online practice test. Can someone explain as to how to solve this type of problems for pmp exam....thanks.

You are currently negotiating a FPIF contract. The target cost = $400,000 with a target profit of 15%. The incentive split has been decided as 60/40. As of today, the actual costs are $350,000. What is the actual profit?
a. $80,000
b. $20,000
c. $40,000
d. $10,000
signor_rk
Contributor
Contributor
Posts: 182
Joined: Wed Jun 18, 2014 3:47 pm

Re: Help with this question

Postby signor_rk Sat Nov 22, 2014 11:15 am

Option # A)$80,000

Justification:

Calculation for Actual Fee/Profit:
Given figures ,
Target Cost = $ 400,000
Target Profit = 15% i.e., 0.15* $400,000 = $ 60,000
Actual Cost = $ 350,000
So , Savings amount due to Cost under run = $ 400,000 - $ 350,000 = $ 50,000
Profit Sharing Ratio = 60:40
So, Sellers share = 0.40 * $ 50,000 = $ 20,000
Therefore, Actual Profit = $ 60,000 + $ 20,000 = $ 80,000
Regards ,

Ranjit
coolpmp69
Contributor
Contributor
Posts: 282
Joined: Mon Nov 17, 2014 8:55 pm

Re: Help with this question

Postby coolpmp69 Mon Nov 24, 2014 2:24 pm

Thanks Ranjit. That's very helpful and easy to u'stand
signor_rk
Contributor
Contributor
Posts: 182
Joined: Wed Jun 18, 2014 3:47 pm

Re: Help with this question

Postby signor_rk Tue Nov 25, 2014 5:32 am

Welcome .... :)
Regards ,

Ranjit

Return to “PMP® Open Forum”

Who is online

Users browsing this forum: No registered users and 10 guests