Reference no: EM133120906

Question - Jeff Heun, president of Martinez Always, agrees to construct a concrete cart path at Dakota Golf Club. Martinez Always enters into a contract with Dakota to construct the path for $195,000. In addition, as part of the contract, a performance bonus of $44,000 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 $11,000 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 50% probability that he will complete the project on time, a 30% probability that he will be 1 week late, and a 20% probability that he will be 2 weeks late. Determine the transaction price that Martinez Always should compute for this agreement.