Q10. Credit screening. Tennindo, Inc. is starting up itsnew, cost-efficient gaming systemconsole, the yuu. Tennindo currently has 4,500 cash-paying customers and makes a profit of $40 per unit. Tennindo wants to expand its customer base by allowing customers to buy on credit. It estimates that credit sales will bring in an additional 1,300 customers peryear, but that there will also be a default rate on credit sales of 5%. It costs $220 to make ayuu, which retails for $260. If all customers(old andnew) buy oncredit, what is the cost of bad debt without creditscreening? What is the most Tennindo would pay for credit screening that accurately identifiesbad-debt customers prior to thesale? What are the increased profits from adding credit sales for customers with and without creditscreening? Should Tennindo offer credit sales if credit screening costs $10 percustomer?

If all customers(old andnew) buy oncredit, what is the cost of bad debt without creditscreening?