How is Celing Price calculated ?
4 years 1 month ago #2967
PMP Exam Prep for the Masses!
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Hi Poorvi -
The Ceiling Price is a dollar figure that is agreed upon by two parties engaging in a Fixed Price Incentive Fee contract (FPIF). All costs above the agreed upon Price Ceiling are the responsibility of the seller, who is obligated to complete the work (PMBOK Guide, 4th Edition, page 322). As far as calculating the Ceiling Price, there isn't really a calculation involved in determining the Ceiling Price since it is set as a fixed amount by the two parties who engaged in the contract.
First of all, rest assured that you will most likely not encounter a question that asks to calculate the Ceiling Price, since this is something that will be given to you in the question. Having said that, below is the formula for the Point of Total Assumption (PTA), with which the Ceiling Price I usually associated.
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