Answer:
A) Determine the transaction price that Tamarisk Always should compute for this agreement.
total transaction price = contract price ($183,000) + expected value of the bonus
expected value of the bonus:
$37,200 x 50% = $18,600
($37,200 - $9,300) x 30% = $8,370
($37,200 - $9,300 - $9,300) x 20% = $3,720
total = $30,690
total transaction price = $183,000 + $30,690 = $213,690
B) Assume that Jeff Heun has reviewed his work schedule and decided that it makes sense to complete this project on time. Assuming that he now believes that the probability for completing the project on time is 83% and otherwise it will be finished 1 week late, determine the transaction price.
total transaction price = contract price ($183,000) + expected value of the bonus
expected value of the bonus:
$37,200 x 83% = $30,876
($37,200 - $9,300) x 17% = $4,743
total = $35,619
total transaction price = $183,000 + $35,619 = $218,619
