Asked by Ma Kathrina Alindayu on Jul 11, 2024
Verified
If the delivery date is some months or years away and if there is substantial chance of price escalation,a supplier may feel that there is far too much risk of loss to agree to sell under a:
A) firm-fixed-price plus incentive fee (FFPIF) .
B) firm-fixed-price (FFP) .
C) cost-no-fee (CNF) .
D) cost-plus-fixed-fee (CPFF) .
E) cost-plus-incentive-fee (CPIF) .
Price Escalation
An increase in the price of products or services over time, often due to factors such as inflation or increased costs of materials.
Firm-Fixed-Price
A type of contract where the price agreed upon is not subject to any adjustments based on the cost experience of the supplier or service provider.
Substantial Chance
A significant opportunity or probability of occurrences that can have considerable effects or outcomes.
- Understand the method of cost-based pricing and its impact on ethical pricing tactics.
Verified Answer
NT
Nadeem TariqJul 16, 2024
Final Answer :
B
Explanation :
A firm-fixed-price (FFP) contract does not allow for any adjustment to the agreed-upon price, making it risky for suppliers if there's a substantial chance of price escalation before the delivery date.
Learning Objectives
- Understand the method of cost-based pricing and its impact on ethical pricing tactics.