Lyle Fleming, president of Fleming, Inc., wants you to resolve his dispute with Mia Gooden over the amount of a finder's fee due Gooden. Fleming hired Gooden to locate a new plant site to expand the business. By agreement, Gooden's fee was to be 15 percent of the "cost of the property (excluding the finder's fee), measured according to generally accepted accounting principles."

Gooden located Site 1 and Site 2 for Fleming to consider. Each site had a selling price of \(\$ 150,000\), and the geographic locations of both sites were equally acceptable to Fleming. Fleming employed an engineering firm to conduct the geological tests necessary to determine the relative quality of the two sites for construction. The tests, which cost \(\$ 10,000\) for each site, showed that Site 1 was superior to Site 2.

The owner of Site 1 initially gave Fleming 30 days-a reasonable period-to decide whether or not to buy the property. However, Fleming procrastinated in contracting the geological tests, and the results were not available by the end of the 30-day period. Fleming requested a two-week extension. The Site 1 owner granted Fleming the additional two weeks but charged him \(\$ 6,000\) for the extension (which Fleming paid). Fleming eventually bought Site 1.

Fleming sent Gooden a fee of \(\$ 24,000\), which was 15 percent of a cost computed as follows:

Gooden believes that she is entitled to \(\$ 26,400\), based on a cost computed as follows:

Required 

What fee is Gooden entitled to under the agreement? Explain.

Transcribed Image Text:

Sales price, Site 1.... Geological tests, Site 1.. Total $150,000 10,000 $160,000