Consider three businesses, all of which offer price reductions to their customers. The first is an independently owned gas station located at a busy intersection in Cincinnati, Ohio, that offers a 3 percent discount for cash purchases of gasoline. The second is a large home improvement store located near an interstate exit in suburban Cleveland that offers building contractors terms of 3/10, n/45. And third is a clothing manufacturer and catalog retailer located in Columbus. Several times during each year, a catalog is distributed in which men’s dress shirts are heavily discounted if purchased in lots of four or more.
Required:
1. What are the main objectives of the discount policies in each of the three businesses?
2. How does accounting information assist each business in achieving its discount policy objectives?