Which of the Following Is True About Fixed Price with Price

question 45

Multiple Choice

Which of the following is true about fixed price with price adjustment contract?

• A) It is used for short projects.
• B) It provides an incentive for performing on the project above the adjusted baseline in the contract.
• C) The most common use of this type of contract is the inflation adjusted price.
• D) In this contract, the organization agrees to pay the contractor for the cost of performing the service.
• E) It requires good documentation of the costs that occurred on the project.

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Definitions:

Fair Value

An estimate of the market value of an asset or liability, based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

Consideration

In legal and accounting terms, it refers to the value, either monetary or a promise of action, that is exchanged between parties in a contract.

Residual Value

the estimated value that an asset will have at the end of its useful life.

Straight-Line Method

A depreciation technique that allocates an equal portion of an asset’s initial cost to each year of its useful life.