Reference no: EM132949919

Question - Absco signed a contract with Jeans Are Us to ship 300,000 pairs of jeans. The contract price is $20 per pair. These jeans are very fashionable at the current time but are not expected to stay in style for a long period of time. Because they are new, Absco has only manufactured 10,000 pairs. The contract specifies that Absco will immediately ship the 10,000 pairs and then will ship the remaining portions of the 290,000 pairs as soon as possible after a specific number of pairs are requested by Jeans Are Us. If Absco has shipped fewer than 300,000 pairs by the end of the year, it will ship the remaining jeans to fulfill the contract at the end of year one. Because Jeans Are Us is concerned that the demand for jeans will be heavy, it has provided an incentive in the contract for Absco to expedite production of the jeans. Jeans Are Us will provide a bonus to Absco if it delivers the jeans within a certain period.

The percentage bonus is as follows:

Delivered Within Percentage Bonus

1 day of request 5%

5 days of request 4%

10 days of request 3%

15 days of request 2%

-Absco has never been involved in a transaction that involves bonuses for delivery expediency. In addition, because of the newness of the style of jeans on the market, Jeans Are Us is not able to give Absco any idea of when it will request jeans and how many it will request each time. Absco uses the expected value method of measuring variable consideration. Accordingly, it has determined that the expected value of the bonus consideration is $180,000. However, Absco is quite uncertain how quickly it can manufacture these jeans. State the total transaction price with calculations in one page.