Essay on Proj598-Week-3-Quiz1

1416 Words Jan 14th, 2016 6 Pages
1. | Question : | (TCO B) All of the below would be considered good selection criteria for a buyer to use to select a seller, except | | | Student Answer: | | proprietary rights of buyer, overall cost, and warrantee offered by seller. | | | | past work done by seller, intellectual property rights, and risk associated with a given seller. | | | | technical capability of seller, understanding of work by seller, and business type of seller. | | | | managerial approach of seller, capacity of seller to do the work, and ability of seller to make a reasonable make-or-buy decision. | | Instructor Explanation: | PMBOK® Guide, Chapter 12 | | | | Points Received: | 10 of 10 | | Comments: | | | | …show more content…
The price is held constant regardless of the cost of production. Cost plus pricing, often used in government contracts, refers to a contract where the price is based upon the actual cost of production and any agreed upon rates of profit or fees. Businesses use one of two established methods for calculating cost plus prices. Each model carries inherent risks and rewards for buyers and sellers. Fixed price is generally implemented when cost estimates can occur with reasonable accuracy and concrete outcomes are known. Some businesses favor cost plus pricing because it is easy to calculate and can be applied in a variety of situations. Advantages of Fixed Price The most significant benefit of a fixed price model is that it allows the buyer to set in advance an exact budget. The buyer is aware of the total cost before the project even begins. The fixed price model typically limits the number of changes that occur during the implementation phase of the project. Contractors know their budget confines and therefore usually deliver detailed plans at the start. The seller is able to charge a high upfront cost under the fixed price model. Once the price has been agreed upon, the buyer does not experience sticker shock or contest the amount owed. Advantages of Cost Plus The primary benefit of cost plus pricing is the ease of calculation. Cost plus pricing lets the business owner know immediately if

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