Question

What is the cost-benefit relationship in deciding whether to offer credit to customers, and whether to accept bank credit cards? A. For a company to manage credit internally, costs include the cost of creating and operating a credit department, training sales staff to sell on credit, and losses due to nonpayment. B. If the gross margin increase resulting from additional sales exceeds the costs of offering credit, the company will increase its net income by offering credit. C. For a company to accept bank credit cards, costs include training, plus a fee paid per transaction, occasional losses due to clerical error, and possibly some special equipment. D. All of the above.

Answer 1

Correct Option : D All Of The Above

Generally many companies gives credit to customers for certain days of allowance in making payment in order to increase in sales revenue. However in deciding such policies the company must consider the cost of credit and benefit from additional sales. If the benefit from additional sales is greater than cost of credit then company may choose to give credit to customer. There is another option available to company to accept bank credit card in which company gets fund immediately at the time of sales however company needs to be incurred some expenditure to manage this facilities such as training , fees paid per transaction and occasional losses due to error. In this situation also company should compare additional gain from sales revenue with credit card expenses.