Consulting helped Schmidt Roofers put various cost saving techniques into place. The contract specifies that Skip will receive a flat fee of $70,000 and an additional $19,000 if Schmidt attains a target amount of cost savings. Skip estimates a 20% chance that Schmidt will reach the target for cost savings. Assuming that Skip uses the expected-value approach, what is the transaction price for this product? a. $19,000 b. $70,000 c. $73,800 d. $89,000
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Skip Consulting helped Schmidt Roofers put various cost saving techniques into place. The
contract specifies that Skip will receive a flat fee of $70,000 and an additional $19,000 if Schmidt
attains a target amount of cost savings. Skip estimates a 20% chance that Schmidt will reach the
target for cost savings. Assuming that Skip uses the expected-value approach, what is the
transaction price for this product?
a. $19,000
b. $70,000
c. $73,800
d. $89,000
Transaction price: It is the consideration which is expected by an organization in exchange of goods or services to customer.
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