1.The Silver Spokes Bicycle Shop has decided to offer credit to its customers during the spring selling season. Sales are expected to be 600 bicycles. The average cost to the shop of a bicycle is $525. The owner knows that only 96 percent of the customers will be able to make their payments. To identify the remaining 4 percent, the company is considering subscribing to a credit agency. The initial charge for this service is $750, with an additional charge of $10 per individual report.

What is the cost of the subscription to the credit agency? (Do not round intermediate calculations.)

Cost of the subscription

$

What is the savings from collection of the bad debts? (Do not round intermediate calculations.)

Savings from not selling to bad credit risks

$

What are the company's net savings from subscribing to the credit reports? (Do not round intermediate calculations,)

Company's net savings

$

Should company subscribe to the agency?

Yes

No

2.Cow Chips, Inc., a large fertilizer distributor based in California, is planning to use a lockbox system to speed up collections from its customers located on the East Coast. A Philadelphia-area bank will provide this service for an annual fee of $15,000 paid at the end of the year plus 10 cents per transaction. The estimated reduction in collection and processing time is one day. Treasury bills are currently yielding 5 percent per year.

If the average customer payment in this region is $4,800, how many customers are needed, on average, each day to make the system profitable for Cow Chips? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Number of customers

per day