Question: Compton Audio sells MP3 players During 2011 Compton sold 1 000

Compton Audio sells MP3 players. During 2011, Compton sold 1,000 units at an average of $250 per unit. Each unit cost Compton $100. At present, Compton offers no sales discounts.
Compton’s controller suggests that a generous sales discount policy would increase annual sales to 1,400 units and also improve cash flow. She proposes 5/10, n/30 and believes that 80 percent of the customers will take advantage of the discount.
1. If the controller is correct, determine how much the new sales discount policy would add to net sales and gross margin.
2. Conceptual Connection: Explain why the sales discount policy might improve cash flow.

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  • CreatedSeptember 22, 2015
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