PTA Question -- Lehmann Question No: 16

Question : 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?

A. $1,300,000
B. $1,500,000
C. $80,000
D. $1,125,000

Need Clarification that
1. For Final fee and Final price Calculation : there is no Target Fee and Actual Cost.
2. for PTA there is no Target Price also given in the question.

how shall I calculate PTA
need your explaination .

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Question has been discussed before

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PTA=(Ceiling Price-Target Price)/Buyers Ratio+TC
TP=TC+FF=$1,000,000+$ 100,000=$1,100,000
PTA=(CP-TP)/Buyers Ratio+TC===>$125,000+$1,000,000=$1,125,000

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