Calculating Project Costs

Determine the final price paid by the buyer in these scenarios (show all work)

a. Cost plus incentive fee contract:

Incentive contract may be developled to speed up the completing of a project or reduce buyer costs, consider the data below:

Target Cost=$100,000

Target Fee= $20,000

Target Price = $120,000

Sharing ratio=70/30 (70%buyer, 30% seller)

Actual cost = $90,000

Additional fee =

Total Fee paid =

Total project price =

b. Cost plus incentive fee contract (CPIF)

In the CPIF contract, the seller receives a bonus for performing the work below a target cost. Consider the data below:

In this problem, the seller agreed upon a target costs of $200,000 and a target fee of $14,000. If the seller performs the work at a lower cost thatn $200,000, then the seller will receive additional profit up to a maximum profit of $18,000. If the seller performs the work for more than the target costs, then the seller will receive less profit but at least the minimum of $4,000. If the work is performed below the target cost, the buyer keeps 80% of the underrun and the seller keeps 20% of the underrun as an extra profit up to a maximum of $18,000. If the contract is overrun, the buyer pays 80% of the overrun and the seller pays 20% which is subtracted from the target profit as long as the profit is less than $4000.

Target cost = $200,000

Target fee = $14,000

Sharing ratio = 80/20 (80% buyer, 20% seller)

Profit ceiling = $18,000

Profit floor = $4,000

If the actual worked performed amounted to $190,000

Calculate the following:

Cost savings for the project=

Sellers keep=

Seller total profit=

Seller reimbursement=

Now assume the seller spent $240,000 performing the work

Cost overrun=

Buyer Pays=

Seller Pays=

Seller reimbursement =

Sellers reimbursed=