Que No. 139 simulation test paper # 6. Please Help

Discussion in 'PMP' started by anujkumar.singh(3625109), Aug 11, 2018 at 1:29 AM.

  1. anujkumar.singh(3625109)

    anujkumar.singh(3625109) Active Member
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    Hi,

    In the below questions all answers seem wrong to me and my answer comes as 53750(45000+8750). [0.25*35000=8750 Incentive fee]

    In a negotiated cost plus incentive fee (SPIF) contract, the following figures were finalized: a target cost of $355,000, a target fee of $45,000, and a sharing ratio of 75/25. If the actual cost of the project is $320,000, what will be the final fee to the seller?
    $36,250
    $8,750
    $35,000
    $45,000
    Correct Option: B

    EXPLANATION


    As the cost of the project is lower than expected, the seller will receive their $45,000 fee plus $25% of the savings between $355,000 and $325,000 ($25,000 x 25% = $7,500). $45,000 + $7,500 = $52,500.
     
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  2. anujkumar.singh(3625109)

    anujkumar.singh(3625109) Active Member
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    Also to mention that since i didn't find my answer in the list I selected D as the answer ie 45000, which is wrong as per the test.
     
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  3. Sreidhar D(1820)

    Sreidhar D(1820) Well-Known Member
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    HI ANUJ,
    I agree with you that the question seems incorrect. However the calculation you have shown also seems incorrect.
    TARGET COST- $355,000
    ACTUAL COST- $320,000
    SAVINGS-355000-32000= $35000 .So, sharing ratio is 75/25- hence 25% of 35,000 is 8,750.
    Since this is given as option B, the question should have been" What is the final incentive to be paid to the seller? "
    I shall communicate to Simplilearn of this correction in the question.

    Thanks
    Sridhar.D
     
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  4. tim jerome

    tim jerome Well-Known Member
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    I've seen variations of questions that ask "what is the total fee" as well - and that assumes you understand that
    the 'total fee' equals the seller's share of savings (or overrun) and the target fee. This would be the 8,750 plus the original 45,000.
     
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    Arvind Shekhar likes this.

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