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Hello, Namaste, Konnichiwa!! Welcome from Sunny Sensei!! This video is a continuation of my earlier video on fixed price incentive fee contracts. In this video we will look at the formulas for the calculation of actual price. This is the first one. It gives the actual price as actual cost plus target profit plus the product of cost variance and sellers share of risk in percent or the ceiling price. The second formula gives the actual price as difference of actual cost and target cost multiplied by buyers share of risk in percent added to target price, or the ceiling price The only difference between these two formulas is the first option. We will prove that these formulas are equivalent. Lets start with the left-hand side of this equation. Target profit equals target price minus target cost. We also know that cost variance equals target cost minus actual cost multiplied by sellers share of risk in percent. solving further actual cost plus target price minus target cost plu
