When credit policy is at the optimal point, the:
A) total costs of granting credit will be maximized.
B) carrying costs of credit will be equal to zero.
C) opportunity cost of credit will be equal to zero.
D) carrying costs will equal the opportunity costs.
E) total costs will equal the opportunity costs.

Question

Quizplus · Accepted Answer

When credit policy is at the optimal point, the carrying costs (costs of financing the inventory) will be balanced with the opportunity costs (costs of missed sales due to strict credit policies), resulting in carrying costs equaling the opportunity costs. The total costs will not necessarily be equal to the opportunity costs, nor will the carrying costs be equal to zero.

When Credit Policy Is at the Optimal Point, The