question archive Jeff Heun, president of Blossom Always, agrees to construct a concrete cart path at Dakota Golf Club
Subject:AccountingPrice:9.82 Bought3
Jeff Heun, president of Blossom Always, agrees to construct a concrete cart path at Dakota Golf Club. Blossom Always enters into a contract with Dakota to construct the path for $232,000. In addition, as part of the contract, a performance bonus of $41,600 will be paid based on the timing of completion. The performance bonus will be paid fully if completed by the agreed-upon date. The performance bonus decreases by $10,400 per week for every week beyond the agreed-upon completion date. Jeff has been involved in a number of contracts that had performance bonuses as part of the agreement in the past. As a result, he is fairly confident that he will receive a good portion of the performance bonus. Jeff estimates, given the constraints of his schedule related to other jobs, that there is 55% probability that he will complete the project on time, a 30% probability that he will be 1 week late, and a 15% probability that he will be 2 weeks late.
(a)
Determine the transaction price that Blossom Always should compute for this agreement.
Transaction Price | $enter the transaction price that Blossom Always should compute for this agreemen |
$267360
Step-by-step explanation
Consider the table;
particulars | Probability | Working | Amount | Estimated Amount |
Project Completed On time | 55% | 41600 | 41600 | 22880 |
1 Week Late | 30% | 41600-(10400*1) | 31200 | 9360 |
2 Week late | 15% | 41600-(10400*2) | 20800 | 3120 |
Total estimated Performance bonus | 35360 |
Transaction Price is;
= Contract Price + Estimated performance Bonus
Where,
Contract Price = $232000
Estimated Performance Bonus = 35360
Then,
= 232000+35360
=267360
Therefore, transaction Price $267360