# Fixed Price Incentive Fee (FPIF) Contracts Calculations for the PMP Exam

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Fixed Price Incentive Fee Contract - Seller Fee Calculations under Cost Overruns
Share Ratio                                               Buyer's Share      Seller's Share
S.No.     Target Cost Seller's Fee      Target Price    Ceiling Price Actual Cost Cost Overrun                                     Ratio              Ratio                                               Point of Total Assumption           Buyer's Price        Seller's Profit/Loss
(for cost overrun)                                          (of cost overrun) (of cost overrun)
(for cost overrun) (for cost overrun)
BP = TP + BS
PTA = ( ( CP - TP ) / BSR ) +
TC            SF        TP = TC + SF          CP             AC             CO                 SR                   BSR                SSR            BS = CO x BSR        SS = CO x SSR                                            OR                 SP = BP - AC
TC
CP, whichever is lower

1          \$60,000       \$15,000        \$75,000         \$100,000        \$60,000           \$0              60 : 40                0.60               0.40                 \$0                  \$0                  \$101,667                      \$75,000                \$15,000

2          \$60,000       \$15,000        \$75,000         \$100,000        \$70,000        \$10,000            60 : 40                0.60               0.40               \$6,000              \$4,000                \$101,667                      \$81,000                \$11,000

3          \$60,000       \$15,000        \$75,000         \$100,000        \$80,000        \$20,000            60 : 40                0.60               0.40              \$12,000              \$8,000                \$101,667                      \$87,000                 \$7,000

4          \$60,000       \$15,000        \$75,000         \$100,000        \$90,000        \$30,000            60 : 40                0.60               0.40              \$18,000              \$12,000               \$101,667                      \$93,000                 \$3,000

5          \$60,000       \$15,000        \$75,000         \$100,000        \$97,500        \$37,500            60 : 40                0.60               0.40              \$22,500              \$15,000               \$101,667                      \$97,500                   \$0

6          \$60,000       \$15,000        \$75,000         \$100,000       \$100,000        \$40,000            60 : 40                0.60               0.40              \$24,000              \$16,000               \$101,667                      \$99,000                 -\$1,000

7          \$60,000       \$15,000        \$75,000         \$100,000       \$101,667        \$41,667            60 : 40                0.60               0.40              \$25,000              \$16,667               \$101,667                     \$100,000                 -\$1,667

8          \$60,000       \$15,000        \$75,000         \$100,000       \$110,000        \$50,000            60 : 40                0.60               0.40              \$30,000              \$20,000               \$101,667                     \$100,000                -\$10,000

9          \$60,000       \$15,000        \$75,000         \$100,000       \$120,000        \$60,000            60 : 40                0.60               0.40              \$36,000              \$24,000               \$101,667                     \$100,000                -\$20,000

Notes
Row    1   When Actual Cost is equal to Target Cost, Seller gets the full fee, and Buyer pays the Target Price.
Row    5   Point of Total Assumption is NOT the same as point of zero profit/loss (for the Seller).
Row    6   Seller may be in losses even before the Actual Cost hits the Point of Total Assumption.
Row    7   When Actual Cost equals Point of Total Assumption, Buyer Price equals Ceiling Price. In other words, at or beyond Point of Total Assumption, Buyer Price equals Ceiling Price

Website http://www.deepfriedbrainpmp.com

Version: 1.1                                                                                                                 Created by: Harwinder Singh Bhatia, PMP                                                                                                 Released: 06-Dec-2009
FPIF Calculations

Fixed Price Incentive Fee Contract - Point of Total Assumption Calculations
Target Cost         Target Fee            Target Price            Ceiling Price              Share Ratio          Buyer's Share Ratio     Point of Total Assumption
TC                  TF                    TP                       CP                                                BSR            PTA = ( ( CP - TP ) / BSR ) + TC
PTA greater than Ceiling Price

\$60,000            \$15,000                \$75,000                   \$100,000                    60 : 40                 0.6                      \$101,667

PTA less than Ceiling Price

\$60,000            \$15,000                \$75,000                    \$80,000                    60 : 40                 0.6                       \$68,333

Notes
Point of Total Assumption can be higher than the Ceiling Price

Website     http://www.deepfriedbrainpmp.com

Version: 1.1                                                      Created by: Harwinder Singh Bhatia, PMP                                                  Released: 06-Dec-2009

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Description: Fixed Price Incentive Fee (FPIF) Contracts Calculations - Learn how to calculate Seller Fee and Point of Total Assumption with the help of numericals.
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