In a cost-reimbursable contract with a 70/30 share ratio and a target cost of $200,000, if the actual cost is $180,000, how much does the buyer pay in total?

Question

Project Management (PMP) — Medium

In a cost-reimbursable contract with a 70/30 share ratio and a target cost of $200,000, if the actual cost is $180,000, how much does the buyer pay in total?

Accepted Answer

In a cost-reimbursable contract with a 70/30 share ratio, the buyer pays the actual cost plus a share of the profit. Since the actual cost is $180,000, which is below the target cost of $200,000, the buyer benefits from the cost savings. The correct payment is calculated as $180,000 + (30% of $20,000), resulting in $186,000.