Polaris offers its dealers financing plans while Arctic Cat currently relies on outside companies to provide its dealers' financing. Assume Arctic Cat is considering starting its own finance unit to provide financing directly to its dealers.
Required
1. What are some of the costs that Arctic Cat should consider when deciding whether to offer financing services to its dealers? Are these costs different from what Polaris must consider when offering additional new financing services? Explain.
2. Would variable or absorption costing be more useful to Arctic Cat in analyzing whether its new financing service is profitable? Explain.