1 thought on “PMP Study Tips – Mock Exam Question

  1. gstramb Post author

    Correct answer is B. In a Cost-Plus-Incentive-Fee (CPIF) type of contract, the seller is reimbursed for allowable costs for performing the contract work and receives a predetermined fee. In some cases, if the final costs are less than the expected costs, then both the buyer and the seller benefit from the cost saving based on a pre-negotiated sharing formula. In the current situation, the predetermined fee is 10% of US$500,000 = US$50,000. Since the project came in at US$450,000, the cost saving is 500,000 – 450,000 = 50,000. The sharing formula is 80:20, hence the additional payout to the seller = (20/100)*50,000 = 10,000. Therefore, the total cost of the contract = 450,000 + 50,000 + 10,000 = US$510,000.

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