Question

1. Sales discounts with terms 2/10, n/30 mean: a. 10 percent discount for payment within 30 days. b. 2 percent discount for payment within 10 days, or the full amount (less returns) due within 30 days. c. Two-tenths of a percent discount for payment within 30 days. d. None of the above. 2. A company has been successful in reducing the amount of sales returns and allowances. At the same time, a credit card company reduced the credit card discount from 3% to 2%. What effect will these changes have on the company's net sales, all other things equal

Answer 1

Answer: 1. b. 2 percent discount for payment within 10 days, or the full amount (less returns) due within 30 days.

2. Net Sales will Increase.

Explanation:

1. When a company offers Sales discounts with terms 2/10, n/30, it is broken down as follows,

The 2 is the discount in percentage,

The 10 is the number of days you have to pay the company in order to receive the discount

n/30 is the total amount of days you have to pay the company if you had been unable to do so in those first 10 days. Paying within this period after the first 10 days does not entitle you to thw discount.

Therefore the above sales discount terms offered are a 2 percent discount for payment within 10 days, or the full amount (less returns) due within 30 days.

2. Sales returns and Sales Allowances have the effect of reducing the net sales figure as goods are returned and risk has to be dealt with. If they reduce therefore, the net sales figure rises.

A reduction in the discount by the credit card company also leads to a Rise in sales because it reduces the amount that the company has to give in discounts thereby increasing the amount made per sale/ transaction.

If you need any further clarification, do comment. Cheers.