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In: Operations Management

A. You have signed a cost plus fixed fee (CPFF) contract with a supplier to perform...

A. You have signed a cost plus fixed fee (CPFF) contract with a supplier to perform some work for you. The contract parameters include: Estimated Cost: $100,000 Fixed Fee: $10,000 If the seller is able to complete the work for a cost of $80,000, what will be the final price paid to the seller?

B. You have signed a cost plus percentage cost (CPPC) contract with a supplier to perform some work for you. The contract parameters include the following: Estimated Cost: $100,000 Fee Percentage: 10% The supplier with your authorization is able to complete the work for a cost of $120,000. There is no change in scope. What is the final price paid to the supplier?

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Expert Solution

Answer A: Final price= $80000+ Fixed cost= 80000+ 10000= $90,000

Answer B: because we agreed to pay 10% extra of the cost price

Final price= work completion cost + 10% of work completion cost= 120,000 + 120000*0.1 = $132,000

keosha answered 2 years ago
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