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Credit screening. Tennindo, Inc. is starting up its new, cost-efficient gaming system console, the yuu. Tennindo currently has 4,500 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 $220 to make a yuu, which retails for $280. 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?

Credit screening. Tennindo, Inc. is starting up its new, cost-efficient gaming system console, the yuu. Tennindo currently has 4,500 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 $220 to make a yuu, which retails for $280. 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?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Chapter 13, Question 6. Attached is a similar question with answers. Please answer the same four parts for the new question

Credit screening. Tennindo, Inc. is starting up its new, cost-efficient gaming system console, the yuu. Tennindo currently has 4,500 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 $220 to make a yuu, which retails for $280. 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?
Transcribed Image Text:Credit screening. Tennindo, Inc. is starting up its new, cost-efficient gaming system console, the yuu. Tennindo currently has 4,500 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 $220 to make a yuu, which retails for $280. 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?
Credit screening. Tennindo, Inc. is starting up its new, cost-efficient gaming system console, the yuu. Tennindo currently has 3,500 cash-paying customers and makes a profit of $50 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 $220 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? $ 53,900 (Round to the nearest dollar.) What is the most Tennindo would pay for credit screening that accurately identifies bad-debt customers prior to the sale? $ 11.79 (Round to the nearest cent.) If credit screening costs $10 per customer, what are the increased profits from adding credit sales for customers with and without credit screening? $ 4,900 (Round to the nearest dollar.) 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? (Select the best response.) OA. Yes, Tennindo should offer credit sales because the credit screening will increase the firm's profit. O B. No, Tennindo should not offer credit sales because the credit screening will decrease the firm's profit.
Transcribed Image Text:Credit screening. Tennindo, Inc. is starting up its new, cost-efficient gaming system console, the yuu. Tennindo currently has 3,500 cash-paying customers and makes a profit of $50 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 $220 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? $ 53,900 (Round to the nearest dollar.) What is the most Tennindo would pay for credit screening that accurately identifies bad-debt customers prior to the sale? $ 11.79 (Round to the nearest cent.) If credit screening costs $10 per customer, what are the increased profits from adding credit sales for customers with and without credit screening? $ 4,900 (Round to the nearest dollar.) 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? (Select the best response.) OA. Yes, Tennindo should offer credit sales because the credit screening will increase the firm's profit. O B. No, Tennindo should not offer credit sales because the credit screening will decrease the firm's profit.
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