What is the dollar value of bad debts the firm expects

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Reference no: EM132796380

Question - Little Runabout Inc. makes small trailers for light-duty towing behind SUVs and small pickup trucks. Its trailers typically sell for? $2,500. Many of its customers have asked for credit terms to aid in purchasing the trailers. The? firm's finance department has estimated the following profile for its light-duty trailers and customer? base:

Annual? sales: 12,000 trailers

Annual production costs per? trailer: $1,500

Lost sales if credit is not provided for? customers: 2,000 trailers

Default rate if all customers purchase on? credit: 3.00%

What is the dollar value of bad debts the firm expects to accumulate over a? year? Given this? amount, what is the maximum average amount per unit sold that the firm should spend on credit? screening?

A. ?$4,500,000; $$562.50

B. ?$450,000; $45.00

C. ?$450,000; $37.50

D. ?$4,500,000; $450.00

Reference no: EM132796380

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