Project Management Professional (PMP) Exam Practice – Question1612

The buyer has negotiated a cost-plus-incentive fee contract with the seller. The contract has a target cost of $300,000, a target fee of $40,000, a share ratio of 80/20, a maximum fee of $60,000, and a minimum fee of $10,000. If the seller has actual costs of
$380,000, how much fee will the buyer pay?


A. $104,000
B. $56,000
C. $30,000
D. $24,000

Correct Answer: D

Explanation:

Explanation:
Comparing actual costs with the target cost shows an $80,000 overrun. The overrun is shared 80/20 (with the buyer’s share always listed first). In this case 20% of $80,000 is $16,000, the seller’s share, which is deducted from the $40,000 target fee. The
remaining $24,000 is the fee paid to the seller.