When I try to enter the formula for Product Family I am getting this error. If I change the format for Product Family to "P2 Products" the formula will work, but I am aware that activity 6 states to label the format for product family as "P1 product family". I do not know what I am doing wrong.
As @abhi1017 has stated If you try and retrieve the parent of a list who has no parent set up the formula will ignore the PARENT and action the ITEM function.
Therefore, it will return the list item relevant to the ITEM function. As the line item is formatted as the parent the result is incompatible with the line item format and therefore will trigger an error.
Update the parent hierarchy setting so that P1 is selected as the parent list of P2.
Re-import the P2 list and allocated each P2 to a parent P1.
Once you have completed these steps re-run your formula and the parent list item will be retrieved.