Labowski's Long Boards Inc.makes high-quality skateboards for recreational use.It wholesales its boards in groups of 10 for a package price of $1,500.Many of its customers have asked for credit terms to aid in purchasing the boards.The firm's finance department has estimated the following profile for its long boards and customer base:
Annual sales: 10,000 long board packages
Annual production costs per board package: $1,000
Lost sales if credit is not provided for customers: 1,200 long board packages
Default rate if all customers purchase on credit: 4.00%
What is the profit if the firm has a credit policy? What is the change in the profit if the firm moves from a cash-only policy to a credit policy? What is the dollar value of bad debts the firm expects to accumulate over a year? Given the bad-debt dollar amount,what is the maximum average amount per long board package that the firm should spend on credit screening?

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The Answer of Labowski's Long Boards Inc.makes high-quality skateboards for recreational use.It wholesales its boards in groups of 10 for a package price of $1,500.Many of its customers have asked for credit terms to aid in purchasing the boards.The firm's finance department has estimated the following profile for its long boards and customer base:
Annual sales: 10,000 long board packages
Annual production costs per board package: $1,000
Lost sales if credit is not provided for customers: 1,200 long board packages
Default rate if all customers purchase on credit: 4.00%
What is the profit if the firm has a credit policy? What is the change in the profit if the firm moves from a cash-only policy to a credit policy? What is the dollar value of bad debts the firm expects to accumulate over a year? Given the bad-debt dollar amount,what is the maximum average amount per long board package that the firm should spend on credit screening?