PMI PMP-Project Management Professional Practice Exam Q. 1261 to 1270
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Set of 10 Questions
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Q. 1261: Buyers use a variety of methods to provide incentives to a seller to complete work early or within certain contractually specified time frames. One such incentive is the use of liquidated damages. From the seller’s perspective, liquidated damages are what form of incentive?
A. Positive
B. Negative
C. Nominal
D. Risk-prone
Section: Mix Questions
Justification in favor of the correct answer:
Liquidated damages are considered negative incentives because they result in a loss of revenue for the seller if it fails to perform rather than a gain in revenue if it performs well.
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Q. 1262: The principal function of a warranty is to:
A. Provide assurance of the level of quality to be provided
B. Provide a way to assert claims for late payment
C. Provide a way to allow additional time following acceptance to correct deficiencies, without additional costs
D. Ensure that goods purchased fit the purposes for which they are to be used
Section: Mix Questions
Justification in favor of the correct answer:
A warranty is one party’s assurance to the other that goods will meet certain standards of quality, including condition, reliability, description, function, or performance. This assurance may be express or implied.
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Q. 1263: You have decided to award a contract to a seller that has provided quality services to your company frequently in the past. Your current project, although somewhat different from previous projects, is similar to other work the seller has performed. In this situation, to minimize your risk you should award what type of contract?
A. Fixed price with economic price adjustment
B. Fixed-price-incentive (firm target)
C. Firm-fixed-price
D. Cost-plus-award-fee
Section: Mix Questions
Justification in favor of the correct answer:
In a firm-fixed-price contract, the seller receives a fixed sum of money for the work performed regardless of costs. This arrangement places the greatest financial risk on the seller and encourages it to control costs.
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Q. 1264: As project manager, you need a relatively fast and informal method addressing disagreements with contractors. One such method is to submit the issue in question to an impartial third party for resolution. This process is known as:
A. Alternative dispute resolution
B. Problem processing
C. Steering resolution
D. Mediation litigation
Section: Mix Questions
Justification in favor of the correct answer:
Alternative dispute resolution, or dispute resolution, is a relatively informal way to address differences of opinion on contracts. Its purpose is to address such issues without having to seek formal legal redress through the courts.
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Q. 1265: A no-cost settlement sometimes is used:
A. To close out a successful contract
B. In lieu of formal termination procedures
C. When buyer property has been furnished under the contract
D. When such an arrangement is acceptable to one of the parties involved
Section: Mix Questions
Justification in favor of the correct answer:
A no-cost settlement can be used in lieu of formal termination procedures when the seller has indicated that such an arrangement is acceptable, no buyer property has been furnished under the contract, no payments are due the seller, no other obligations are outstanding, and the product or service can be readily obtained elsewhere.
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Q. 1266: When writing payment terms in your fixed-price subcontracts it is especially important to:
A. Include incentives if the seller exceeds or fails below defined objectives
B. Provide flexibility to redirect the seller if the scope of work is not defined precisely confusion
C. Link progress made to compensation paid
D. Associate the payment to a specific time period for more efficient accounting
Section: Mix Questions
Justification in favor of the correct answer:
A buyer under a fixed-price contract should pay a seller for work delivered rather than time expended. Linking payment with progress ensures that the seller will focus on results and not on effort expended.
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Q. 1267: A buyer has negotiated a fixed-price-incentive-fee contract with the seller. The contract has a target cost of $200,000, a target profit of $30,000, and a target price of $230,000. The buyer also has negotiated a ceiling price of $270,000 and a share ratio of 70/30. If the seller completes the contract with actual costs of $170,000, how much profit will the buyer pay the seller?
A. $21,000
B. $35,000
C. $39,000
D.$51,000
Section: Mix Questions
Justification in favor of the correct answer:
To calculate the fee that the buyer must pay, actual costs are compared with the target cost. If actual costs are less than the target cost, the seller will earn profit that is additional to the target profit. If actual costs are more than the target cost, the seller will lose profit from the target profit. The amount of profit is determined by the share ratio (with the buyer’s share listed first). In this example, the seller is under target cost by $30,000. That amount will be split 70/30. So the buyer keeps $21,000, and the seller receives an additional $9,000 added to the target profit, which is the incentive. Total fee is $39,000.
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Q. 1268: Requirements for formal deliverable acceptance are defined in the:
A. Contract
B. Procurement management plan
C. Overall project management plan
D. Specifications
Section: Mix Questions
Justification in favor of the correct answer:
Two important components of any contract include what the buyer wants to buy and how the buyer defines acceptance of the products or services delivered. For contract closure to occur, deliverable acceptance must be completed.
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Q. 1269: Payment bonds are often required by the contract and require specific actions under the stated conditions. Payment bonds are specifically designed to ensure that the prime contractor provides payment of:
A. Insurance premiums
B. Weekly payrolls
C. Subcontractors, laborers, and sellers of material
D. Damages for accidents caused
Section: Mix Questions
Justification in favor of the correct answer:
Payment bonds, which are required by the buyer, are issued by guarantors to prime contractors. The buyer wants to ensure that subcontractors of the prime contractor receive payment so that work is not disrupted.
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Q. 1270: You are working on a contract in a remote location. The contract requires you to be on site at the office on a daily basis. You were unable to get to the office for three days last month because of severe blizzard conditions. Your failure to appear at the office was excused because of a clause in the contract entitled:
A. Non compos mentis
B. Forjurer royalme
C. Force majeure
D. Force minoris dictus
Section: Mix Questions
Justification in favor of the correct answer:
Force majeure clauses can be used to protect either party from events that are outside their control and not a result of their negligence, such as acts of nature, war, civil disobedience, or labor disruption.
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