Jeff Heun, president of Bridgeport Always, agrees to construct a concrete cart path at Dakota Golf Club. Bridgeport Always enters into a contract with Dakota to construct the path for $181,000. In addition, as part of the contract, a performance bonus of $39,600 will be paid based on the timing of completion. The performance bonus will be paid fully if completed by the agreed-upon date. The performance bonus decreases by $9,900 per week for every week beyond the agreed-upon completion date. Jeff has been involved in a number of contracts that had performance bonuses as part of the agreement in the past. As a result, he is fairly confident that he will receive a good portion of the performance bonus. Jeff estimates, given the constraints of his schedule related to other jobs, that there is 60% probability that he will complete the project on time, a 25% probability that he will be 1 week late, and a 15% probability that he will be 2 weeks late. (a) Determine the transaction price that Bridgeport Always should compute for this agreement.
Jeff Heun, president of Bridgeport Always, agrees to construct a concrete cart path at Dakota Golf Club. Bridgeport Always enters into a contract with Dakota to construct the path for $181,000. In addition, as part of the contract, a performance bonus of $39,600 will be paid based on the timing of completion. The performance bonus will be paid fully if completed by the agreed-upon date. The performance bonus decreases by $9,900 per week for every week beyond the agreed-upon completion date. Jeff has been involved in a number of contracts that had performance bonuses as part of the agreement in the past. As a result, he is fairly confident that he will receive a good portion of the performance bonus. Jeff estimates, given the constraints of his schedule related to other jobs, that there is 60% probability that he will complete the project on time, a 25% probability that he will be 1 week late, and a 15% probability that he will be 2 weeks late. (a) Determine the transaction price that Bridgeport Always should compute for this agreement.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Jeff Heun, president of Bridgeport Always, agrees to construct a concrete cart path at Dakota Golf Club. Bridgeport Always enters into a contract with Dakota to construct the path for $181,000. In addition, as part of the contract, a performance bonus of $39,600 will be paid based on the timing of completion. The performance bonus will be paid fully if completed by the agreed-upon date. The performance bonus decreases by $9,900 per week for every week beyond the agreed-upon completion date. Jeff has been involved in a number of contracts that had performance bonuses as part of the agreement in the past. As a result, he is fairly confident that he will receive a good portion of the performance bonus. Jeff estimates, given the constraints of his schedule related to other jobs, that there is 60% probability that he will complete the project on time, a 25% probability that he will be 1 week late, and a 15% probability that he will be 2 weeks late.
(a)
Determine the transaction price that Bridgeport Always should compute for this agreement.
| Transaction Price | $enter the transaction price that Bridgeport Always should compute for this agreemen |
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