Question

charcoal grills, accessories, and installation services for custom patio grilling stations. The State of Kentucky is planning major renovations in its parks during 2017 and enters into a contract with BBQ to purchase 400 durable, easy maintenance, standard charcoal grills during 2017. The grills are priced at $200 each (with a cost of $160 each), and BBQ provides a 6% volume discount if Kentucky purchases at least 300 grills during 2017. On April 17, 2017, BBQ Company delivered and received payment for 280 grills. Based on prior experience with the State of Kentucky renovation projects, the delivery of this many grills makes it certain that Kentucky will meet the discount threshold later that same year. What amount of revenue should BBQ report for these units sold on April 17th?

Answer 1

BBQ Company should recognize revenue of $52,640 for the sale of 280 grills to the State of Kentucky on April 17, 2017, factoring in the 6% volume discount as they are expected to purchase at least 300 grills during the year.

Step-by-step explanation:

The amount of revenue BBQ should report for the units sold on April 17th takes into account the 6% volume discount that the State of Kentucky qualifies for, as they are expected to purchase at least 300 grills during 2017.

Since BBQ is certain, based on prior experience, that Kentucky will meet the discount threshold later that same year, they should recognize revenue factoring in the discount. The regular price is $200 per grill, but with the volume discount, it drops to $188 per grill (6% of $200 is $12; $200 - $12 = $188). Therefore, for 280 grills, BBQ should report a revenue of $52,640 (280 grills x $188 per grill).

Answer 2

The answer is: BBQ should report a revenue of $52,640

Step-by-step explanation:

If BBQ is sure that the State of Kentucky is going to meet the discount threshold, then they should consider the discount when recording their revenue.

revenue = $200 (regular price) x 280 units x 94% (net price after discount)

revenue = $52,640