TOPIC: PM Prepcast Pre-Course Self-Assessmen (Q11)

"Question 11: Work has been completed on your Fixed Price Incentive
Contract. The original contract was for $55,000, of which $50,000 is target
cost and $5,000 is target profit. A share ratio of 50/50 has been agreed
upon. The actual cost incurred on the project is $48,000. How much is the
final price?"

I've reviewed the answer key and understood the answer; however, my question is with the original problem. The problem outlines the the work has been completed on a 'Fixed Price Incentive' - after reviewing definitions in PMBOK 5th pg363-4, I wonder if this should read 'Cost Plus Incentive Fee Contract' instead as 'buyer and seller share costs from the departures based upon a prenegotiated cost-sharing formula'?

If this presumption is incorrect - would you be able to briefly explain the differences between these contracts?

Hi Jonathan,

I agree with your conclusion that the question is describing a "Cost Plus Incentive Fee Contract" as fixed price contracts don't have cost-sharing formulas.

I agree with Ahmed. Share ratios show up with Cost Plus Incentive Fee contracts. This is a "bad" (or at least confusing) question!

Thank you for your response, Ahmed and Steve. I will mark this one as odd.