Questions on CPIF

Submitted by sumedha82 on Wed, 09/14/2011 - 13:35

Hi Guys,


Can someone explain when to add target profit and when we do not. For eg. in below question. We did not  add target profit.


The contract is a CPIF contract. Target costs= $ 500,000 ; Traget profit=$ 80,000. However, project was completed at $450,000. The incentive split is 80/20. How much is the total contract cost?


  


 


1) 470,000


2) 490,000


3) 460,000


4) 450,000 


The total contract cost is 450,000+10,000=460,000.

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Fri, 09/16/2011 - 03:55

20% of 50K which is 10K will be shared with the vendor. So from the buyer perspective the project cost is $460000. Here target price is just given to confuse and doesnt really have to be used anywhere.


Since the project was completed for 50K less and 10K was shared with vendor so Target profit should now be 120K. In case that was the question.