Question

Fragment Company is a wholesaler that sells merchandise in large quantities. Its catalog indicates a list price of $300 per unit on a particular product and a 40% trade discount is offered for quantity purchases of 50 units or more. The cost of shipping the merchandise is $7 per unit under terms FOB shipping point. If a customer purchases 100 units of this product, what is the amount of sales revenue that Fragment will record from this sale

Answer 1

Answer:

Recognized Sales Value = $18,000

Explanation:

Fragment company selling Price is $300/Unit

40% trade discount is offered for purchases of 50 units and more. That is, $300 x 40% = $120.

This implies anyone buying 50 or more will pay only $180/Unit ($300 - $120)

Customer Purchased 100 units

Sales terms is FOB, which implies Fragment is responsible for transportation costs of the products from his warehouse to the Port of Shipment including loading onto the ship. The Buyer will be responsible for Marine Freight expense, Insurance, Off-loading and shipment to his own warehouse

The $7 Per Unit indicated will account for inland transport to Port of shipment

Recognized Sales  =  100 units x $180 = $18,000

Cost of Haulage (Carriage outwards) is $7 x 100 units = $700