PMP -POINT OF TOTAL ASSUMPTION

PROOF OF FORMULA

IN ABOVE FIGURE 

TC + (BSR X COST  OVER RUN)+ TF = CP    ------ eq 1 

TC + COST OVER RUN  = PTA                         -------eq2

COST OVER RUN = PTA -TC                            -------eq3

substitute eq 3 in eq 1

TC + (BSRX (PTA-TC) + TF = CP

TC+TF = TP  ---------------------------------------------eq4

Hence

TP + (BSRX (PTA-TC) = CP

=>(BSRX (PTA-TC) = CP-TP

=>PTA-TC = (CP-TP)/BSR

=> PTA =[(CP-TP)/BSR]+TC

Here CP= Cieling Price TC = Target Cost,  TF = Target Fee /Target Profit, TP=Target Price, BSR= Buyer's Ratio in decimal, PTA = Point of Total Assumption