A contractor is performing a fixed price contract to produce and deliver oil valves at a loss basis of 0.9 when the contract is terminated for convenience. The negotiated elements are the settlement expense of $10,000, price for accepted valves of $1,000,000, and the reminder of valve inventory basis of $4,000,000. How much is the settlement price for this contract termination?

Explain the rationale to use the formula and method.

Is the federal government financially liable within the settlement for the contractor's poor financial management?

(Provide reference)