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Tennindo, Inc. is starting up its​ new, cost-efficient gaming system​ console, the yuu. Tennindo currently has...

Tennindo, Inc. is starting up its​ new, cost-efficient gaming system​ console, the yuu. Tennindo currently has 5, 000 ​cash-paying customers and makes a profit of ​$40 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 1,400 customers per​ year, but that there will also be a default rate on credit sales of 5​%. It costs ​$230 to make a​ yuu, which retails for ​$270. 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?

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jeff jeffy answered 1 year ago
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