Question

Credit screening. Tennindo, Inc. is starting up its new, cost-efficient gaming system console, the yuu. Tennindo currently has 3,000 cash-paying customers and makes a profit of $70 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 1,500 customers per year, but that there will also be a default rate on credit sales of 5%. It costs $250 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 from adding credit sales for customers with and without credit screening? Should Tennindo offer credit sales if credit screening costs $10 per customer? If all customers old and new) buy on credit, what is the cost of bad debt without credit screening? $ (Round to the nearest dollar.)
QUESTIONS TO ANSWER: (PLEASE ANSWER ALL)

1. If all customers​ (old and​ new) buy on​ credit, what is the cost of bad debt without credit​ screening?

2. What is the most Tennindo would pay for credit screening that accurately identifies​ bad-debt customers prior to the​ sale?

3. If credit screening costs ​$10 per​ customer, what are the increased profits from adding credit sales for customers with and without credit​ screening?

4. (MULTIPLE CHOICE) Compare​ Tennindo's profit obtained if all customers paid cash and its profits obtained if credit screening were used. Should Tennindo offer credit sales if credit screening costs ​$10 per​ customer?

A. Yes, Tennindo should offer credit sales because the credit screening will increase the firm's profit.

B. No, Tennindo should not offer credit sales because the credit screening will decrease the firm's profit.

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

? v 1* 07:01 ENG 23-02-202013 0231 T L M N O Q R S T U V W X a 210 211 212 213 a COST OF BAD DEBT = (3000 + 1500) X 250 X 5% = 56250 214 215 b 216 217 218 219 220 MAXIMUM COST OF CREDIT SCREEN = EXISTING PROFIT = 3000 X70 = PROFIT ON NEW CREDIT TERMS = 4500 X 70 X 95% = ADDITIONAL PROFIT = 299250-210000 = THEREFORE COST OF SCREEN PER CUSTOMER = 89250/4500 = 210000 299250 89250 19.83 221 4500 X 70 X 95% = PROFITS WITHOUT CREDIT SCREEN = LESS : BAD DEBT COST (SEE ANWER (a)) 299250 56250 243000 222 223 224 225 226 PROFITS WITH SCREEN CREDIT SCREEN COST 4500 X 70 X 95% = 4500 X 10 = 299250 45000 254250 227 228 d. option A should offer credit sales 229 YES, BECAUSE PROFIT WILL INCREASE FROM 243000 TO 254250 230 231 232 233 ... MULTIPLE GROWTH RR-NR-BOND Ioan options show -BEP-performance sensitivity CRDIT POLICY KE RATIO CCA CVP Sheet1 thom :