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    Customer Credit problems

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    Berkshire Sports, Inc., operates a mail-order running-shoe business. Management is considering dropping its policy of no credit. The credit policy under consideration by Berkshire follows:

    No Credit Credit
    Price per unit $35 $40
    Cost per unit $25 $32
    Quantity sold 2,000 3,000
    Probability of payment 100% 85%
    Credit period 0 1
    Discount rate 0 3

    a. Should Berkshire offer credit to its customers?
    b. What must the probability of payment be before Berkshire would adopt the policy?

    © BrainMass Inc. brainmass.com October 1, 2020, 10:20 pm ad1c9bdddf

    Solution Preview

    a. Revenue with no Credit:
    Total profit per unit = 35-25 = 10
    Total Revenue = 10 * ...

    Solution Summary

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