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Moover Construction enters into a contract with a customer to build a warehouse for $900,000 on June 30, 2020, with a performance bonus of $60,000
Moover Construction enters into a contract with a customer to build a warehouse for $900,000 on June 30, 2020, with a performance bonus of $60,000 if the building is completed by October 31, 2020. The bonus is reduced by $20,000 each week that completion is delayed. The contract also states that if the warehouse receives a favorable safety inspection rating from government inspectors by November 30, Moover will receive a performance bonus of $40,000. Moover commonly includes these completion bonuses in its contracts and based on prior experience, estimates the following completion outcomes: Completed by October 31, 2020 Probability 35% November 7, 2020 50% November 14, 2020 10% 5% November 21, 2020 In addition, Moover estimates there is a 90% chance that the warehouse will receive a favorable safety inspection rating upon timely completion. Required: a. Assume Moover uses the expected value approach. Determine the transaction price for this transaction. $ b. Assume Moover uses the most likely amount approach. Determine the transaction price for this transaction
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