On June 1, 2020, Consulting Inc. enters into a contract with a customer to build a website for its start-up business for $95,000, plus a possible performance bonus. The contract includes the creation of the website as a vehicle to communicate information about the customer’s products, to sell products, and to collect payment for the products. The pricing of the customized website project includes a performance bonus of $19,000 to be paid to Consulting Inc. if the website is completed by July 31, 2020. The performance bonus will be reduced for each week beyond the due date (up to three weeks).

Consulting Inc. is unable to estimate the probabilities of all possible outcomes. Based on past experience, Consulting Inc. believes that there is a 30% chance that it will complete the customized website by July 31, 2020, and a 70% chance that it will not.

Indicate which method is appropriate in estimating the variable consideration (Which is the best option, only chose one) -

a. Expected value method

b. Fixed Consideration

c. Most likely amount method

Compute the transaction price for Consulting Inc.’s revenue contract. $_________

Answer rating: 100% (QA)

Option c is correct The most appropriate method in es... View the full answer