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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.


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 point of total assumption.

$183,333

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Expert Solution

Target cost = 150,000

Target fee = 30,000

Total = 180,000

Sharing ratio = 60/40

Ceiling price = 200,000

Actual cost = 210,000

Total assumption?

PTA = [(Ceiling Price -total Target Price)/Buyer's Share Ratio] + Target Cost

(200,000 -180,000)/60% + 150,000= 20,000/0.6 +150,000

33,333+ 150,000= 183,333

jeff jeffy answered 2 years ago
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