Question: Tennindo Inc. is starting up its new, cost-efficient gaming system console, the yuu. Tennindo currently has 4,000 cash-paying customers and makes a profit of $60
Tennindo Inc. is starting up its new, cost-efficient gaming system console, the yuu. Tennindo currently has 4,000 cash-paying customers and makes a profit of $60 per unit. Tennindo wants to expand its customer base by allowing customers to buy on credit. It estimates that credit sales will bring in an additional 1,200 customers per year but that there will also be a default rate on credit sales of 5%. It costs $260 to make a yuu, which retails for $320. If all customers (old and new) buy on credit, what is the cost of bad debt without credit screening? What is the most Tennindo would pay for credit screening that accurately identifies bad-debt customers prior to the sale? What are the increased profits by adding credit sales for customers with and without credit screening? Should Tennindo offer credit sales if credit screening costs $10 per customer?
Step by Step Solution
3.49 Rating (186 Votes )
There are 3 Steps involved in it
Cost of bad debt is 005 4000 1200 260 67600 Maximum cost of Credit Screen Old Profits 4000 6... View full answer
Get step-by-step solutions from verified subject matter experts
Document Format (1 attachment)
296-B-F-F-M (2706).docx
120 KBs Word File
