PTA - Point of Total Confussion ... Please help

Submitted by rahul178 on Wed, 05/25/2011 - 10:12

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???


 

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PMP / CAPM exam Question bank
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gk

Wed, 05/25/2011 - 11:48

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

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

=1125000

 

Note: target price = targer cost + target fee

niteshrs

Wed, 05/25/2011 - 14:17

How is buyer profit arrived at 0.8 here?

aaron

Wed, 05/25/2011 - 19:36

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

arvind_bhatt25

Tue, 06/14/2011 - 13:03

calculation is wrong..


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

PMPBOY

Tue, 06/14/2011 - 15:51


calculation is RIGHT because


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

sudhir_mr

Sun, 08/21/2011 - 15:29

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

admin's picture

admin

Wed, 06/15/2011 - 03:52

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

Akshay Singh

Mon, 06/27/2011 - 07:47

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

jyotig

Tue, 04/05/2016 - 07:47

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
 
For more insight of this topic refer to the following links
 

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