Gray Uniforms is a wholesaler who sells school uniforms to retailers. On August 1, Gray contracts with Excel School Uniforms to sell 2,000 uniforms to Excel to be delivered September 1. The contract price is set at $300 each. The contract provides for a 10% volume discount if sales exceed 3,000 uniforms. The probability of sales exceeding 3,000 uniforms is expected to be 71%. Using the most-likely-amount approach, the consideration is estimated to be ________.
A) $813,000
B) $639,000
C) $540,000
D) $426,000

Question

Quizplus · Accepted Answer

The most-likely-amount approach considers the most likely outcome. Since the probability of exceeding 3,000 uniforms is 71%, the most likely scenario is that the volume discount will not apply. Therefore, the consideration is calculated as 2,000 uniforms x $300 each = $600,000. However, since the question asks for the consideration estimated using the most-likely-amount approach, and the volume discount is not applicable, the correct calculation should be 2,000 uniforms x $300 = $600,000, but the closest option is $540,000, which seems to be a mistake in the options provided.

Gray Uniforms Is a Wholesaler Who Sells School Uniforms to Retailers