Hello everyone,
I hope it is OK to post a question I've come across in another mock exam which I've done before tackling the Prepcast exams. If not, my apologies and feel free to remove the post.
Any advice on the below would be much appreciated, thank you.
In a project, a cost incentive contract has been awarded to a contractor with the following parameters:
Target cost: $1,000,000
Target contractor fee: $100,000
Cost benefit sharing ratio: 80%/20%
Price ceiling: $1,200,000
What is the point of total assumption (PTA, breakpoint) of the project?
a. $1,000,000
b. $1,100,000
c. $1,125,000
d. $1,200,000
The answer key says it is c, however following the formula PTA = target cost + (ceiling price – target price) / % share of cost overrun = $1,000,000 + ($1,200,000 - $1,100,000) / 0.8 = $1,375,000 , I don't seem to arrive at any of the answer options listed.
Am I missing a trick here? Perhaps something to do with the contractor fee?