Question

ClipClop Company sells horseshoes to customers at a discount of 4% if the customer orders more than 10,000 horseshoes in a year. The price per shoe is $2. In April, Oats Company orders 4,000 horseshoes from ClipClop. Based on past experience with Oats Company, ClipClop expects Oats to meet the volume threshold of 10,000 horseshoes by the end of the year. What amount of revenue should ClipClop record in connection with the April sale?



A. $0 because ClipClop does not know if Oats will meet the volume discount threshold

B. $7,680

C. $8,000

D. $20,000

Answer 1

Answer:

B) $7,680

Explanation:

If ClipClop Company expects its client, Oats Company, will meet the 10,000 units threshold that enables the discount, then they should sell the first 2,000 units with a discount.

total sales price = $2 per unit x 4,000 units x (1 - 0.04) =  $7,680