Under Credit Terms of 2/10, Net 25, Customers Should

question 92

Multiple Choice

Under credit terms of 2/10, net 25, customers should:

• A) Always pay on the 25^thday.
• B) Take the 10 percent discount and pay immediately.
• C) Take the discount and pay on the 2^ndday.
• D) Either take the discount or pay on the 25^thday.
• E) Both take the discount and pay on the 25^thday.

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Definitions:

CVP Analysis

Cost-Volume-Profit Analysis, a management accounting methodology used for understanding the relationship between costs, volumes of sales, and profit.

Variable Cost

Costs that vary in proportion to the level of activity or volume of production in a business.

Annual Fixed Costs

Expenses that a business incurs that do not fluctuate with changes in production level or sales volume, such as rent or salaries, benchmarked on a yearly basis.

Graphical Approach

A method of solving problems or representing data using charts, graphs, or diagrams.