Travel and Tow Trailers Inc $$56250

question 1

Multiple Choice

Travel and Tow Trailers 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: 10,000 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;$45.00
• B)$450,000;$56.25
• C)$4,500,000;$450.00
• D)$4,500,000;$$562.50

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Definitions:

Voting Shares

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Fair Value

The approximate financial worth of an asset or liability, determined by existing prices in a transparent and contestable market.

Fully Amortized

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Direct Combination Costs

Expenses directly associated with the execution of a business combination, such as legal fees, consulting fees, and other administrative costs.