In a cost-plus contract with a 12% fee, the contractor incurs $450,000 in allowable costs and $25,000 in non-allowable costs. What is the contractor's total compensation?
Correct Answer
D) $507,000
Total compensation = Allowable costs + Fee on allowable costs = $450,000 + ($450,000 × 12%) = $450,000 + $54,000 = $504,000. Non-allowable costs are not reimbursed and don't earn fee.
Why This Is the Correct Answer
Total compensation = Allowable costs + Fee on allowable costs = $450,000 + ($450,000 × 12%) = $450,000 + $54,000 = $504,000. Non-allowable costs are not reimbursed and don't earn fee.
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