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.

Explanation:

Buyers prefer the firm-fixed-price contract because it places more risk on the seller. Although the seller bears the greatest degree of risk, it also has the maximum potential for profit. Because the seller receives an agreed-upon amount regardless of its costs, it is
motivated to decrease costs by efficient production.

Explanation:
The nature of an indirect cost is such that it is neither possible nor practical to measure how much of the cost is attributable to a single project. These costs are allocated to the project by the performing organization as a cost of doing business.

Explanation:
Under the doctrine of waiver, a party can relinquish rights that it otherwise has under the contract. If the seller offers incomplete, defective, or late performance, and the buyer’s project manager knowingly accepts that performance, the buyer has waived its right to
strict performance. In some circumstances, the party at fault may remain liable for provable damages, but the waiver will prevent the buyer from claiming a material breach and, thus, from terminating the contract.

Explanation:
Risk avoidance involves changing the project management plan to eliminate the threat entirely.

Explanation:
The probability and impact matrix can be used to classify risks according to their level of impact and to prioritize them for future quantitative analyses and responses based on their rating. Typically these risk rating rules are specified by the organization in advance
of the project. The matrix specifies combinations of probability and impact that lead to rating the risks as low, moderate, or high priority.

Explanation:
Project risk has its origin in the uncertainty that is present in all projects. Organizations and stakeholders are willing to accept varying degrees of risk, and risks that are threats to the project may be accepted if the risks are within tolerances and are in balance with
the rewards to be gained. This example of adopting a fast-track schedule is a risk taken to achieve the reward created by the earlier completion date.

Explanation:
For some risks it is appropriate for the project team to make a response plan that will be executed only under certain predefined conditions if it is believed that there will be sufficient warning to implement the plan.

Explanation:
It is not feasible or necessary to quantify every risk. Therefore, a risk audit should never have as an objective to ensure that each project risk has a computed expected value.

Explanation:
Although it might have a negative connotation, exploitation is a strategy used for risks with positive impacts where the organization wants to ensure that the opportunity is realized.