Clearwater Hampers is a small British company that sells luxury food and drink in various combinations in picnic hampers. Food and wine are seen as classic, fail-safe gifts in a market where gift-giving is increasingly tricky. Corporate customers, both in the United Kingdom and abroad, are important to the business. The firm's products are also available in a number of retail establishments around the world. The leading salesperson for Clearwater Hampers is Peter Austin who has been with the company since it began operation in 1979. The firm's owners were originally trout farmers who needed a source of income during the winter months and who diversified into selling fine liquors, cheeses, chocolates, and other luxury food items. The company uses a variety of promotions to make prospects aware of the company's products. A New York-based retailer purchases picnic hampers for $75,000 on November 1 and is given a cash discount of 3/10 net 30. If the invoice is paid on November 6, the retailer will:

A) pay $75,000.
B) receive a trade discount of $2,250.
C) receive a quantity discount of $1,500.
D) receive a cash discount of $2,250.
E) pay $75,000 plus a penalty charge of $2,250.

Question

Nicole Tasatmaz · Accepted Answer

Final Answer : D, Explanation :  The retailer will receive a cash discount of $2,250 because a 3/10 net 30 term means a 3% discount is given if the invoice is paid within 10 days. $75,000 * 0.03 = $2,250.

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