Little Runabout Inc $$56250

question 49

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: Annual sales: 12,000 trailers
Annual production costs per trailer: $1,500
Lost sales if credit is not provided for customers: 2,000 trailers
Default rate if all customers purchase on credit: 3.00%
What is the dollar value of bad debts the firm expects to accumulate over a year? Given this amount,what is the maximum average amount per unit sold that the firm should spend on credit screening?

• A)$450,000; $37.50
• B)$450,000; $45.00
• C)$4,500,000; $450.00
• D)$4,500,000; $$562.50

---

Definitions:

National Government

The political authority that governs an entire nation, typically consisting of executive, legislative, and judicial branches.

Institutional Incentive

Motivations or rewards structured within organizations or systems, encouraging particular patterns of behavior among their participants or members.

Virginia Plan

A suggestion from delegates from Virginia for a two-chambered legislative body during the creation of the United States Constitution in 1787.

National Government

Refers to the organization through which political authority is exercised at the national level, encompassing all branches and levels of governance.