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Pricing Military Contracts The Pentagon is constantly seeking ways to procure the most effective combat equipment and systems at the lowest possible cost. A key element in most procurement con- tracts is fixed fee based on percentage of full cost for the contract, plus a percentage fixed fee that is incentive based. The latter is based on meeting contract deadlines and meeting or exceeding other contract performance measures. A recent Pentagon contract with Boeing involves a 10 percent fixed fee on cost incurred and another 5-percent-of-incentive award.
Required: Evaluate the compensation plan for this contract, with the fixed fee of 10 percent and the incentive fee of 5 percent. What do you think is the role of the incentive fee, and do you think it is too large or too small?
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Jennifer's Home Remodeling worked on three jobs during March. Job 13 was in process on March 1 with total charges of $5,500. During the month, the additional transactions occurred.
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