Question

Fixed Price Incentive Fee Calculation. In this fixed price incentive fee contract, the target cost is estimated at $150,000 and the target fee is $30,000. The project is over, and the buyer has that the costs were, in fact, $210,000. Because the seller's cost came in higher than the estimated costs, the seller shares in the added cost: 60% to the buyer and 40% to the seller. The ceiling price is $200,000. Calculate the final price.

$200,000

Answer 1

Index	Particulars	Amount
A	Total estimated cost of project	1,50,000
B	Fees for the Project	30,000
C	Total estimated fee for the project (A+B=C)	1,80,000
D	Actual Cost incurred for project completion	2,10,000
E	Additional cost incurred in excess of the estimated total cost(D-A)	60,000
	Note: As per the contract Seller have to bare additional cost of 40% and Buyer have to bare additional cost of 60%
F	Additional cost needs to be bared by the buyer (E*60%)	36,000
	Total cost estimated (A)	1,50,000
	Additional cost to be borne by the buyer (F)	36,000
	Fees for the Project ( C)	30,000
G	Total fees to be Charged for the Project ( A+F+C)	2,16,000
H	But the total fee to be charged is subject to a overall limit of $2,00,000	2,00,000
	Hence fees for the Project is =	2,00,000