Variable Consideration

Robotics Inc. contracts with a customer to build a custom robot to be used in the customer's manufacturing operations for $2,000,000. If the robot is delivered and operational by January 1, the customer will pay Robotics a $200,000 performance bonus. For every week that the robot is not operational, the bonus is reduced by $100,000. Robotics estimates the following possible outcomes and probabilities:

Completed by January 1	40%
One week late	40%
Two weeks late	20%

Determine the transaction price that Robotics should use for this contract when it is signed.

Transaction price

$