Collegiate Tuxedo Rents Apparel Throughout the Year

question 15

Multiple Choice

Collegiate Tuxedo rents apparel throughout the year. They have experienced non-payment by about 20% of their customers with an average loss of $300. Collegiate wants to stem their losses by using an instant electronic credit check on the customer. These checks will cost them $12 on each of the 1,000 customers. The opportunity cost is 2.0% for the credit period. Should they pursue the credit check?

• A) No, because the $24,000 cost is too high.
• B) No, because a $300 loss is minor.
• C) Yes, because the net gain is $30,000.
• D) Yes, because the net gain is $48,000.
• E) Yes, because the net gain is $60,000.

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Definitions:

Mediator

A neutral third party who facilitates negotiations or conflict resolution between disputing parties, aiming for a mutually acceptable agreement.

Implementing Agreement

The process of putting a mutually agreed plan or contract into action.

Positive Effects

Beneficial outcomes or impacts resulting from a particular action or set of conditions.

Accommodating

The approach of being willing to adjust actions or decisions to allow for others’ needs, preferences, or interests.