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PMP Formula of the Week: Point of Total Assumption

Date:
Aug. 10, 2015
Author:
Guest Authors

PMPFormulaOTW475166460Your organization and a seller have just agreed to a contract with a total cost of $150,000, an estimated profit of $10,000, buyer/seller sharing of 70/30 and a ceiling price of $170,000. What is the PTA (point of total assumption)?

A. $170,000
B. $160,000
C. $164,286
D. $166,453

[showhide type="post" more_text="Reveal Answer" less_text="Hide Answer"]

The correct answer is C.

The formula to calculate PTA is: ((Ceiling Price - Total Price)/buyer's Share Ratio) + Total Cost

Find the total price: 150,000 (Total Cost) + 10,000 (Profit) = 160,000. Then, use the formula above to calculate PTA:
=((170,000 - 160,000) / .70) + 150,000
=(10,000/.7) + 150,000
=14,286 + 150,000
PTA = $164,286

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