Given are the statistics for a Project

Accounting Aug 12, 2020

Given are the statistics for a Project. Target Cost = $150,000; Target Fee = $30,000; Target Price = $180,000; Sharing Ratio = 60/40; Ceiling Price = $200,000; Actual Cost = $190,000. Calculate the Fee and the Final Price for the project.

Fee = $30,000, Final Price = $190,000

Fee = $14,000, Final Price = $204,000

Fee = $14,000, Final Price = $200, 000

Fee = $30,000, Final Price = $180, 000

Expert Solution

Computation of the fee for the project:-

Seller's sharing ratio = 40%

Buyer's sharing ratio = 60%

Fee = ((Target cost - Actual cost) * Seller's sharing ratio) + Target fee

= (($150,000 - $190,000) * 40%) + $30,000

= (-$40,000 * 40%) + $30,000

= -$16,000 + $30,000

= $14,000

Computation of the final price for the project:-

Final price = Actual cost + Final fee

= $190,000 + $14,000

= $204,000

Correct option is 2). Fee = $14,000, Final Price = $204,000

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