Little Runabout Inc What Is the Change in the Profit If the Firm

question 3

Multiple Choice

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: $\begin{array}{ll}\text { Annual sales: } & 10,000 \text { trailers } \\\text { Annual production costs per trailer: } & \$ 1,500 \\\text { Lost sales if credit is not provided for customers: } & 2,000 \text { trailers } \\\text { Default rate if all customers purchase on credit: } & 3.00 \%\end{array}$ What is the change in the profit if the firm moves from a cash-only policy to a credit policy?

• A)$1,250,000
• B)$8,000,000
• C)$9,250,000
• D)$15,000,000

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The person or entity that initiates a message or communication.

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