TOPIC: Confusing answer

Hello,

While preparing through exam questions & answers, came across following :

You hired a programmer for $25/hour for two months. What kind of contract is this?
(a) CPIF
(b) Fixed Price
(c) Time & Material
(d) CPAF

Correct Answer : C.

Why ? In the event of fixed price $25/hour and lack of other information on the question ( i.e., material, schedule etc ) why the answer is not B ?

Can anyone please help explaining ?

Thanks

It's not a fixed price contract because you are paying for their time. They will get paid based on the number of hours worked on the job (and any materials that they use to develop the product).

A fixed price contract would look like this: "I am paying you X dollars to do ____. " (In other words, no matter how much time they spend on the job, they are getting X dollars.)

Harry

Hi Jaydip,

In short, it is not a fixed price contract because the amount to be paid will be based on the number of hours worked by the contractor. If he works 100 hours, then he'll be paid $2500. If he works 400 hours he'll be paid $10,000.

On the other hand, if he was contracted to be paid, for example, $7500 to deliver a particular piece of software regardless of the hours expended, that would be a fixed price agreement.

In the question, the contractor is to be paid based on the time he spends doing the work, thus making this a time & material contract, even though there may be no material costs involved.

I hope this helps!

Best of luck in your studies,

Tracy

Thanks Harry and Tracy for the explanation.

I actually overlooked 2 MONTHS. I thought 2 hours.