Im not sure what this problem is asking for, Inalready figured out step one. 70,000 x 20%= 14,000 and 50,000 x 80%= 40,000 which makes the contract price at inception 54,000. After that what do I do? "Thomas Consultants provided Bran Construction with assistance in implementing various cost-savings initiatives. Thomas’s contract specifies that it will receive a flat fee of $50,000 and an additional $20,000 if Bran reaches a prespecified target amount of cost savings. Thomas estimates that there is a 20% chance that Bran will achieve the cost-savings target. Required: Assuming Thomas uses the expected value as its estimate of variable consideration, calculate the transaction price. Assuming Thomas uses the most likely value as its estimate of variable consideration, calculate the transaction price. Assume Thomas uses the expected value as its estimate of variable consideration, but is very uncertain of that estimate due to a lack of experience with similar consulting arrangements. Calculate the transaction price."
Im not sure what this problem is asking for, Inalready figured out step one. 70,000 x 20%= 14,000 and 50,000 x 80%= 40,000 which makes the contract price at inception 54,000. After that what do I do? "Thomas Consultants provided Bran Construction with assistance in implementing various cost-savings initiatives. Thomas’s contract specifies that it will receive a flat fee of $50,000 and an additional $20,000 if Bran reaches a prespecified target amount of cost savings. Thomas estimates that there is a 20% chance that Bran will achieve the cost-savings target. Required: Assuming Thomas uses the expected value as its estimate of variable consideration, calculate the transaction price. Assuming Thomas uses the most likely value as its estimate of variable consideration, calculate the transaction price. Assume Thomas uses the expected value as its estimate of variable consideration, but is very uncertain of that estimate due to a lack of experience with similar consulting arrangements. Calculate the transaction price."
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 4EB: Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all...
Related questions
Question
Im not sure what this problem is asking for, Inalready figured out step one. 70,000 x 20%= 14,000 and 50,000 x 80%= 40,000 which makes the contract price at inception 54,000. After that what do I do?
"Thomas Consultants provided Bran Construction with assistance in implementing various cost-savings initiatives. Thomas’s contract specifies that it will receive a flat fee of $50,000 and an additional $20,000 if Bran reaches a prespecified target amount of cost savings. Thomas estimates that there is a 20% chance that Bran will achieve the cost-savings target.
Required:
- Assuming Thomas uses the expected value as its estimate of variable consideration, calculate the transaction price.
- Assuming Thomas uses the most likely value as its estimate of variable consideration, calculate the transaction price.
- Assume Thomas uses the expected value as its estimate of variable consideration, but is very uncertain of that estimate due to a lack of experience with similar consulting arrangements. Calculate the transaction price."
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning