Answer Happy

homas Consultants provided Bran Construction with assistance in
implementing various cost-savings initiatives. Thomas’s contract
specifies that it will receive a flat fee of $67,000 and an
additional $37,000 if Bran reaches a prespecified target amount of
cost savings. Thomas estimates that there is a 30% chance that Bran
will achieve the cost-savings target.

Required:
1. Assuming Thomas uses the expected value as
its estimate of variable consideration, calculate the transaction
price.
2. Assuming Thomas uses the most likely value
as its estimate of variable consideration, calculate the
transaction price.
3. Assume Thomas uses the expected value as
its estimate of variable consideration, but is very uncertain of
that estimate due to a lack of experience with similar consulting
arrangements. Calculate the transaction price.