Supply Chain Management Professional (SCMP) · Question
Which type of contract minimizes risk for the buyer, as the price is fixed regardless of actual costs incurred by the seller?
A fixed-price contract ensures the buyer pays a predetermined amount, transferring cost risk primarily to the seller.
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Question: Which type of contract minimizes risk for the buyer, as the price is fixed regardless of actual costs incurred by the seller?
Answer options:
- Cost-plus contract
- Time and materials contract ✅ Fixed-price contract
- Incentive contract
Correct answer: Fixed-price contract
Explanation: A fixed-price contract ensures the buyer pays a predetermined amount, transferring cost risk primarily to the seller.
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