A contract for a piece of manufacturing equipment includes a base transaction price of $10,000 but also includes a bonus of $2,000 if the defect rate of units generated by the equipment in the first year of service meets a specified low percentage. Due to the extremely low percentage of defects required, the seller estimates only a 20% chance they will receive the bonus. Assuming the seller uses the expected value method, what transaction price would the seller use for the transaction?

Answer rating: 100% (QA)

To determine the transaction price that the seller would use for the transaction using the expected ... View the full answer