Total Cost Curve & Organizing the Credit Function


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Companies that lend credit to their customers spend money to manage collections, carry bad debt because some customers do not pay what they owe, and incur costs from not having available cash on hand. What is another name for these expenses?

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1. Tonya's Towels, Inc. has decided to offer credit up to a total of $100,000 to its customers. They found that offering credit will increase yearly revenue by 25%. They could have declined to offer credit to their customers and it would have decreased revenue by $8,000. The $8,000 figure is an example of which of the following?

2. Gerald owns a specialty printing company. He is losing sales to a competitor because he does not offer any credit and has decided that he will open credit lines to his customers. What is the mathematical method he should employ to compare and analyze his carrying and opportunity costs?

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About This Quiz & Worksheet

In order to assess your comprehension of the total cost curve and organizing the credit function, explore the worksheet and quiz. For the quiz, you need to know about the different types of costs.

Quiz & Worksheet Goals

You will be assessed on your knowledge of:

  • Examples of a carrying cost
  • The point when the total credit curve is the optimal amount of credit a company can offer to customers
  • Credit elements that must be organized
  • Term for what it costs to offer credit to customers
  • Another type of cost

Skills Practiced

  • Knowledge application - use your knowledge to answer questions about the different types of cost
  • Information recall - access the knowledge you have gained about examples of carrying costs
  • Interpreting information - verify that you can read information about the credit elements that must be organized and interpret them correctly

Additional Learning

If you would like to learn more, use the lesson titled, Total Cost Curve & Organizing the Credit Function. Some tasks you can cover include:

  • Compare and contrast the different types of cost
  • Examine components of the total credit cost curve
  • Detail the ways in which credit is organized