On April 1st, Bob the Builder entered into a contract of one-month duration to build a barn for Nolan. Bob is guaranteed to rece
ive a base fee of $5,000 for his services in addition to a bonus depending on when the project is completed. Nolan created incentives for Bob to finish the barn as soon as he can without jeopardizing the structural integrity of the barn. Nolan offered to pay an additional 30% of the base fee if the project finished 2 weeks early and 10% if the project finished a week early. The probability of finishing 2 weeks early is 30% and the probability of finishing a week early is 60%. What is the expected transaction price with variable consideration estimated as the expected value?
<em>The expected transaction price with variable consideration as the expected value</em> is the calculated as the sum of the products of each price transaction by the corresponding probability.
An algebraic expression comprises both numbers and variables together with at least one arithmetic operation. To evaluate an algebraic expression you have to substitute each variable with a number and perform the operations included.
