White Labs is a wholesaler who sells microscopes for use in high schools to retailers.On August 1 White contracts with the XYZ to sell 1,000 microscopes to XYZ to be delivered September 1.The contract price is set at $300 each,with a 10% volume discount if sales exceed 2,500 microscopes within the year.The probability of sales of 2,500 microscopes is expected to be 55%.Using the most-likely-amount approach the consideration to be recognized is estimated to be ________.
A)$270,000
B)$300,000
C)$165,000
D)$100,000

Question

Quizplus · Accepted Answer

The most likely amount is the amount that is most likely to occur. In this case, the probability of sales of 2,500 microscopes is 55%. Therefore, the most likely amount is the amount that would be recognized if sales were 2,500 microscopes. The contract price is $300 per microscope, and there is a 10% volume discount if sales exceed 2,500 microscopes. Therefore, the most likely amount is $300 - (0.10 x $300) = $270 per microscope. The total consideration to be recognized is $270 x 1,000 = $270,000.

White Labs Is a Wholesaler Who Sells Microscopes for Use