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Collegiate Tuxedo Opportunity Cost of Instant Electronic Checks

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Collegiate Tuxedo rents apparel throughout the year. They have experienced non-payment by about 15% of their customers with an average loss of $200. Collegiate wants to stem their losses by using an instant electronic credit check on the customer. These checks will cost them $7 on each of the 1,000 customers. The opportunity cost is 1.5% for the credit period. Should they pursue the credit check?

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The solution determines the collegiate tuxedo opportunity cost of instant electronic checks.

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Identify the incremental costs and revenues if the company wants to pursue the credit checks:

1. Savings in loss from ...

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