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Rodriguez Rivera Corp. develops website ads for customers. Contract terms and conditions are similar across...

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Accounting

Rodriguez Rivera Corp. develops website ads for customers. Contract terms and conditions are similar across its various contracts. Contracts typically include a fixed fee plus variable consideration for a performance bonus earned when website ads are delivered ahead of schedule. Based on Rodriguez Riveras historical experience, the bonus amounts and associated probabilities for achieving each level of bonus on a new contract just negotiated with Yana Corp follow:
Bonus Amount
Probability of Outcome
$0
15%
$5,000
40%
$10,000
45%
The contract with Yana includes a fixed payment of $20,000. If Rodriguez Rivera uses the expected value method to determine the estimated bonus, what would Rodriguez Rivera use as the transaction price for its contract with Yana? Show/explain your answer.

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