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6/1/2019 Alby Corp. enters into a contract with a town to build a giant playground for $100,000. The town wants the playground to be done
6/1/2019 | Alby Corp. enters into a contract with a town to build a giant playground for $100,000. | ||||
The town wants the playground to be done before school starts so provides a | |||||
performance bonus of $15,000 if the playground is ready to use on September 1. | |||||
The bonus is reduced by $5,000 each week the completion is delayed. | |||||
Alby commonly includes these completion bonuses in its contracts, and, based on | |||||
prior experience, estimates the following completion outcomes. | |||||
Completed by | Probablilty | ||||
1-Sep-19 | 60% | ||||
9/8/2018 | 30% | ||||
9/15/2018 | 10% | ||||
A | THE TRANSACTION PRICE FOR THIS CONTRACT IS____________________ | ||||
B | Assume the same information as in part A except that Alby Corp. has never had any experience | ||||
with completion bonuses in the past. | |||||
THE TRANSACTION PRICE FOR THIS CONTRACT IS____________________ |
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