Answer: <u><em>The transaction price that Indigo should compute for this agreement = </em></u><u>$54,260</u>
Explanation:
First , we'll evaluate Variable consideration using expected value method.
The probability of time completion is 60%
The consideration (performance bonus) = 12,000;
∴ <u>Expected consideration = 60% of 12000 = $7,200
</u>
Probability of completing the project one week late = 20%
The consideration = 9600
∵ The performance bonus reduces by 2400 for delay of a week;
∴ <u>Expected consideration = 20% of 9600 = $1920</u>
Similarly, for a delay of 2 weeks,
<u>Expected consideration = $1,440
</u>
So, the total expected consideration comes to 10,560/-
<u>Transaction price = contract cost + Variable consideration
</u>
<u>
=43700+(12000 × 0.6+ 9600 × 0.2 + 7200 × 0.2)
</u>
<u>
=$54,260</u>
