elocity, a publicly traded corporation with a calendar fiscal year, entered into an agreement with Wedding Planners, Inc. a wedding event planning company on February 14, 2022. The contract specifies that the services will begin on March 1, 2022. Velocity will design a marketing strategy to increase “hits” on Wedding Planners website by 40%. The contract will last for 3 months (though May 31, 2022). Wedding Planners promises to pay $25,000 at the beginning of each month for Velocity’s services with the first payment on March 1, 2022. At the end of the contract, Velocity will be entitled to an additional $15,000 bonus, depending on whether traffic on Wedding Planners’ website has increased by the desired 40%. At the inception of the contract, Velocity estimated there is an 85% chance that they will earn the $15,000 bonus and 15% likelihood they will not. These probabilities are based on past experience with similar projects and the company has significant experience in these types of projects. Which method is appropriate to use to determine the amount of variable consideration? Determine the transaction price. Clearly label all components of your answer
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Velocity, a publicly traded corporation with a calendar fiscal year, entered into an agreement with Wedding Planners, Inc. a wedding event planning company on February 14, 2022. The contract specifies that the services will begin on March 1, 2022. Velocity will design a marketing strategy to increase “hits” on Wedding Planners website by 40%. The contract will last for 3 months (though May 31, 2022). Wedding Planners promises to pay $25,000 at the beginning of each month for Velocity’s services with the first payment on March 1, 2022. At the end of the contract, Velocity will be entitled to an additional $15,000 bonus, depending on whether traffic on Wedding Planners’ website has increased by the desired 40%. At the inception of the contract, Velocity estimated there is an 85% chance that they will earn the $15,000 bonus and 15% likelihood they will not. These probabilities are based on past experience with similar projects and the company has significant experience in these types of projects.
- Which method is appropriate to use to determine the amount of variable consideration?
- Determine the transaction price. Clearly label all components of your answer
The transaction price includes both the fixed amount and the variable amount. The fixed amount in the given case is $25000 at the beginning of the month for 3 months. The variable amount is the additional bonus at the end of 3 months if the desired traffic increases.
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