# PTA - Point of Total Confussion ... Please help

This is question number 16 from oliverlehmann.com:

You are running a project for a customer based on a cost reimbursable contract with the following terms:

 Target costs: \$ 1,000,000 Fixed fee: \$ 100,000 Benefit/cost sharing: 80% / 20% Price ceiling: \$ 1,200,000

Which is the PTA (= Point of total assumption, Break point) of the project?

Now the anser is: \$1,125,000 .... HOW???

### PTA

PTA = [(ceiling price - target price) / Buyer profit] + target cost

=[(1200000-1100000)/0.8] + 1000000

=1125000

Note: target price = targer cost + target fee

### How is buyer profit arrived

How is buyer profit arrived at 0.8 here?

### .8 comes from 80% of 80/20

.8 comes from 80% of 80/20 benefit sharing ratio.

### calculation is wrong..Target

calculation is wrong..

Target price is 1,000,000, not 1,100,000. u have used both in th formula.. :)

### arvind_bhatt25, please check again... You are wrong!

calculation is RIGHT because

Target price is 1,100,000 and not 1,000,000.  [see formula Target Price = Target Cost + Fee]

### PTA for CR valid??

But i thought PTA is only valid for Fixed Price incentive fee contract's (As mentioned in Rita's PMP exam book Page 438). I thought PTA is not valid for CR projects.

Thanks,

Sudhir ### I would want to highlight

I would want to highlight that this is a very good question on PTA and one should expect such questions in real exam too.

Regards

### Target Price = Target Cost +

Target Price = Target Cost + Fixed fee= 1000,000 + 100,000=1100,000

Celining price = 1200,000

PTA = [(ceiling price - target price) / Buyer profit] + target cost

Buyer profit is  80 % or 0.8 based on cost sharing formula.

=[(1200000-1100000)/0.8] + 1000000

=1125000

Regards

Akshay Singh

akshay@emensuslearning.com

www.emensuslearning.com

### Total Price = Target Cost + Target Fee

Total Price = Target Cost + Target Fee = 1,000,000 + 100,000 = 1,100,000
PTA = ((Ceiling price - Target Price)/ buyers share) + Target Cost
PTA = ((1,200,000 - 1,100,000)/0.8) + 1,000,000
PTA = (100,000/0.8) + 1,000,000 = 125,000 + 1,000,000 = 1,125,000

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