Question
BigNet enters into a contract with LilNet (customer) to provide access to BigNets network over a one-year period. The contract offers a discounted usage rate
BigNet enters into a contract with LilNet (customer) to provide access to BigNets network over a one-year period. The contract offers a discounted usage rate of $0.05 per voice minute. The discounted rate is contingent upon LilNets minimum monthly purchase commitment of 25 million minutes of network voice usage. If LilNet is unable to meet the volume commitments, the usage rate increases to $0.08 per voice minute, applied retroactively.
At what rate per minute should BigNet account for this transaction assuming that there is an 85% probability LilNet will meet the minimum monthly volume commitments?
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