Collegiate Tuxedo Rents Apparel Throughout the Year

question 34

Multiple Choice

Collegiate Tuxedo rents apparel throughout the year. They have experienced non-payment by about 15% of their customers with an average loss of $200. Collegiate wants to stem their losses by using an instant electronic credit check on the customer. These checks will cost them $7 on each of the 1,000 customers. The opportunity cost is 1.5% for the credit period. Should they pursue the credit check?

• A) No, because the $7000 cost is too high.
• B) No, because a $200 loss is minor.
• C) Yes, because the net gain is $30,000.
• D) Yes, because the net gain is $23,000.
• E) Yes, because the net gain is $193,000.

---

Definitions:

Diffusion

The process by which molecules move from an area of higher concentration to an area of lower concentration.

Concentration

The amount of a substance per defined space or volume; in a solution, it is the amount of solute dissolved in a unit volume of solvent.

Distilled Water

Water that has been purified through distillation, removing impurities and minerals.

Salt

Molecule consisting of a cation other than hydrogen and an anion other than hydroxide.