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CDE, Inc. contracts with a supplier for the fabrication of trade show booths and displays. The contract is on a cost-plus fixed fee (CPFF) basis, with the supplier's agreed-upon fee set at $15,000 and the estimated allowable cost of materials set at $20,000, for a total of $35,000. The supplier is able to bring down total material costs to $18,500. Given this situation, how much can the supplier bill CDE for the project?
Correct Answer: C
In a cost-plus fixed fee (CPFF) contract, the supplier can bill for the actual costs incurred plus the agreed-upon fixed fee. Since the supplier's fee is fixed at $15,000 and the actual material costs are $18,500, the supplier can bill CDE, Inc. a total of $33,50012. This includes the reduced material costs and the fixed fee, which does not vary with the actual costs.