Determine the transaction price for this transaction

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Question - Crane Construction enters into a contract with a customer to build a warehouse for $940000 on March 30, 2018 with a performance bonus of $40000 if the building is completed by July 31, 2018. The bonus is reduced by $8000 each week that completion is delayed. Crane commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:

Completed by Probability

July 31, 2018 70%

August 7, 2018 20%

August 14, 2018 5%

August 21, 2018 5%

Using the expected value approach, determine the transaction price for this transaction?

A. $694400

B. $976400

C. $940000

D. $686400

Reference no: EM132966134

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