Your first task is to determine an appropriate level of credit to grant. Granting larger amounts of credit will increase the demand for your product. However the probability that you will not receive payment for a sale also increases as the level of credit granted increases. Determining the ideal trade-off between these two effects is YOUR problem. Additionally the variable cost of production will be increased with the level of credit granted.
Nobody knows why.
The firm earns no revenue from other operations. You will need to calculate the firms total revenue, total variable cost and fixed cost. These will allow you to work out the ClubHoy's annual projected profit. The level of credit which maximises this is the optimal solution. In response to this, your boss asks that you prepare a sensitivity analysis, which demonstrates the effect of possible changes in the demand model on the firm's profit.