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: Annual production costs per trailer: Lost sales if credit is not provided for customers: Default rate if all customers purchase on credit: What is the dollar value of bad debts the firm expects to accumulate over a year? a b d $540,000 $450,000 $9,250,000 $6,500,000 12,000 trailers $1,500 2,000 trailers 3.00%
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: Annual production costs per trailer: Lost sales if credit is not provided for customers: Default rate if all customers purchase on credit: What is the dollar value of bad debts the firm expects to accumulate over a year? a b d $540,000 $450,000 $9,250,000 $6,500,000 12,000 trailers $1,500 2,000 trailers 3.00%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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:
Annual production costs per trailer:
Lost sales if credit is not provided for customers:
Default rate if all customers purchase on credit:
What is the dollar value of bad debts the firm expects to accumulate over a year?
a
b
C
Od
$540,000
$450,000
$9,250,000
$6,500,000
12,000 trailers
$1,500
2,000 trailers
3.00%
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