CAPM (Certified Associate in Project Management) Practice Exam

Which type of contract involves payment to the seller for all legitimate actual costs incurred for the work plus a fee representing seller profit?

1. Fixed-price contracts

2. Cost-reimbursable contracts

3. Time and materials contracts

4. Unit price contracts

The correct answer is: Cost-reimbursable contracts

Cost-reimbursable contracts involve the seller being reimbursed for all legitimate costs incurred during the project, as well as receiving a fee for profit. This type of contract is typically used when the scope of work is uncertain or when the buyer wants more control over the project. Option A, fixed-price contracts, would not involve reimbursement of costs and instead would have a fixed price for the entire project. Option C, time and materials contracts, also do not involve a fee for profit for the seller and instead have a set hourly rate for labor and materials. Option D, unit price contracts, would involve a fixed price per unit of work, rather than reimbursing for actual costs.