Marle Construction enters into a contract with a customer to build a warehouse for $950,000 on March 31, 2021, with a performance bonus of $50,000 if the building is completed by July 31, 2021. The bonus is reduced by $10,000 each week that the completion is delayed. Marle commonly includes these completion bonuses in its contracts and based on prior experience, estimates the following completion outcomes: Completed by Probability July 31, 2021 65% August 7, 2021 25% August 14, 2021 5% August 21, 2021 5% Using the probability weighted method, what will total revenue be? Using the most likely method, what will total revenue be?
Marle Construction enters into a contract with a customer to build a warehouse for $950,000 on March 31, 2021, with a performance bonus of $50,000 if the building is completed by July 31, 2021. The bonus is reduced by $10,000 each week that the completion is delayed. Marle commonly includes these completion bonuses in its contracts and based on prior experience, estimates the following completion outcomes: Completed by Probability July 31, 2021 65% August 7, 2021 25% August 14, 2021 5% August 21, 2021 5% Using the probability weighted method, what will total revenue be? Using the most likely method, what will total revenue be?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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- Marle Construction enters into a contract with a customer to build a warehouse for $950,000 on March 31, 2021, with a performance bonus of $50,000 if the building is completed by July 31, 2021. The bonus is reduced by $10,000 each week that the completion is delayed. Marle commonly includes these completion bonuses in its contracts and based on prior experience, estimates the following completion outcomes:
Completed by Probability
July 31, 2021 65%
August 7, 2021 25%
August 14, 2021 5%
August 21, 2021 5%
- Using the probability weighted method, what will total revenue be?
- Using the most likely method, what will total revenue be?
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