Items 1 and 2 are based on the following information:
Effective September 1, a company initiates seasonal dating as a component of its credit policy, allowing wholesale customers to make purchases early but not requiring payment until the retail selling season begins. Sales occur as follows:
|
Date of sale |
Quantity sold |
|
September 1 |
300 units |
|
October 1 |
100 units |
|
November 1 |
100 units |
|
December 1 |
150 units |
|
January 1 |
50 units |
- Each unit has a selling price of $10, regardless of the date of sale.
- The terms of sale are 2/10 net 30, January 1 dating.
- All sales are on credit.
- All customers take the discount and abide by the terms of the discount policy.
- All customers take advantage of the new seasonal dating policy.
- The peak selling season for all customers is mid-November to late December.
For the selling firm, which of the following is not an expected advantage to initiating seasonal dating?
- Reduced storage costs.
- Reduced credit costs.
- Attractive credit terms for customers.
- Reduced uncertainty about sales volume.
For sales after the initiation of the seasonal dating policy on September 1, total collections on or before January 11 will be
- $0
- $6,370
- $6,860
- $7,000