Contract question (CPPC)
Submitted by Latunde on Sat, 04/26/2014 - 10:16
A cost plus percentage cost contract has a estimated cost of $120,000 with an agreed profit of 10% of the cost. The actual cost of the project is $130,000. What is the total reimbursement to the seller?
A) $143,000
B) $142,000
c) $140,000
d) $132,000
Forums:
admin
Sat, 04/26/2014 - 10:44
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$130000 + 10% of $130000 =
$130000 + 10% of $130000 = $143000
wmka2000
Sat, 04/26/2014 - 10:52
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CPPC Contract
I will Recommend (A)
The question didn't refer to Ceiling price, and in CPPC the buyer will pay for the Cost (any Cost incured) Plus agreed percentage fee.
This question is an example of over run cost (inflate) due to bad choice of contract type.
The buyer has to reimburse the actual cost ($130,000) Plus 10% from the cost ($13,000)
Sandy10001
Thu, 08/07/2014 - 03:42
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Correct
Yes, the math above is agreed. Also the 'trick' in the question is whether the test-taker understands the concept of Cost Plus Percentage of Cost. In that contract type it doesn't matter that there are cost overruns. The agreement is for the actual cost (AC) plus the agreed percentage of the actual cost, thus $143,000/answer A.
Frances Tessler
Sun, 08/10/2014 - 21:33
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CPPC
A is correct.