A Large Industrial Firm Allows a Discount on Any Invoice

question 95

Multiple Choice

A large industrial firm allows a discount on any invoice that is paid within 30 days.Of all invoices, 10% receive the discount.In a company audit, 15 invoices are sampled at random.The mean (average) value of the number of the 15 sampled invoices that receive discount is _______

• A)1
• B)3
• C)1.5
• D)2
• E)10

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Definitions:

Net Income

The net income of a company once all costs and taxes are subtracted from its revenues.

Overstatement

The exaggeration of income, assets, or worth in financial reporting.

Freight-out Costs

Expenses associated with the delivery of merchandise from a seller to a buyer; also known as shipping costs or delivery expenses.

Inventory

Inventory represents the goods and materials a business holds for the purpose of resale or production, including raw materials, work-in-progress, and finished goods.