Question

Manual Company sells goods to Nolan Company during 2017. It offers Nolan the following rebates based on total sales to Nolan. If total sales to Nolan are 10,000 units, it will grant a rebate of 2%. If it sells up to 20,000 units, it will grant a rebate of 4%. If it sells up to 30,000 units, it will grant a rebate of 6%. In the first quarter of the year, Manual sells 11,000 units to Nolan at a sales price of $110,000. Manual, based on past experience, has sold over 40,000 units to Nolan, and these sales normally take place in the third quarter of the year. What amount of revenue should Manual report for the sale of the 11,000 units in the first quarter of the year?

Short answer

Sales Revenue is $105,600.

Step-by-step solution

Meaning of Sales Revenue

The amount received by a company through the sale of goods or supply of services is known as sales revenue. Its calculation requires price per unit to be multiplied by the number of units sold.

Sales revenue for the first quarter of the year

The amount of revenue recognized by Manual for the sale of the 11,000 units sold in the first quarter of the year is based on 4% of the rebate is as follows:

$\begin{array}{rcl}\mathrm{Sales}\mathrm{revenue}& =& \mathrm{Selling}\mathrm{price}\times \mathrm{Discount}\mathrm{rate}\\ & =& \$110,000\times \left(1-0.04\right)\\ & =& \$110,000\times 0.94\\ & =& \$105,600\end{array}$

Therefore, Sales revenue for the first quarter of the year is $105,600.