What changes the customer-credit estimate?
You prepare a month-end customer-credit estimate at the fictional Alder Supply Co.
The question
The case method multiplies distinct unsettled eligible claims by their cohort’s settlement probability and standard credit. Add the cohort amounts. The controller approves the estimate and changes.
| Claim rows | Settlement probability | Standard credit (USD) | |
|---|---|---|---|
| Cohort A | 80 | 25% | 50 |
| Cohort B | 20 | 60% | 80 |
Use the opening export provisionally until you have checked the claim IDs.
“Explain what changes the estimate and what the controller needs to decide.”
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A strong answer, step by step
Open each step in turn. This is one strong answer, not the only one.
Step 1: What does the opening export imply?
What would you do here? Open the move you’d make.
Use $5,600 because that is the full value of the rows
Tempting, but it misses something. The case method applies the supplied settlement probability to each cohort.
Show $1,960 and keep the two cohort calculations visible
The strong move. This applies each probability and standard credit to its own row count.
Apply 60% to both cohorts
Tempting, but it misses something. Cohort A has a supplied rate of 25%.
See how a strong candidate says it
“A gives $1,000 and B gives $960, so the opening estimate is $1,960. I would keep the two counts and rates visible for review.”
Why it works: Each cohort has its own probability and credit. The case adds the two estimates.
Step 2: What changes after the ID check?
The ID check finds 10 of the 20 cohort B rows repeat another B claim ID. There are no duplicates in A.
What would you do here? Open the move you’d make.
Reduce B to 10 claims and recalculate at the same rate
The strong move. This applies the same $80 credit and 60% rate to the correct count.
Keep the $960 because the export still has 20 rows
Tempting, but it misses something. Ten rows repeat an ID already in the same cohort.
Reduce both cohorts by half
Tempting, but it misses something. The duplicate check concerns B only.
See how a strong candidate says it
“Cohort B has 10 distinct claims, so it drops to $480 at 60%. Cohort A stays at $1,000. The revised total is $1,480.”
Why it works: A repeated row adds no distinct claim and supplies no reason to change the probability.
Step 3: How do the new records change the estimate?
The settlement log shows 12 distinct A claims settled and their credits posted before cutoff. A reviewed case note sets B’s probability at 80%, based on eight settlements in ten comparable claims.
What would you do here? Open the move you’d make.
Keep A at 80 and update B to 80%
Tempting, but it misses something. That would include 12 settled claims in the outstanding estimate.
Remove settled A claims and use the reviewed B rate
The strong move. This applies the new evidence to the correct input in each cohort.
Use 80% for both cohorts
Tempting, but it misses something. The reviewed change applies to B. A’s rate stays at 25%.
See how a strong candidate says it
“A has 68 unsettled claims at 25%, giving $850. B has 10 claims at the new 80% rate, giving $640. The updated estimate is $1,490.”
Why it works: A’s count changes because credits already posted. B’s rate changes under the reviewed case note.
Step 4: What do you send to the controller?
The controller asks for B at 60% and 90%, with A fixed. The current balance is $1,250 for the same outstanding claims and excludes credits already posted.
What would you do here? Open the move you’d make.
Ask to add the full $1,490
Tempting, but it misses something. The current balance already includes $1,250 for this same scope.
Ask to add $320 because it is the high case
Tempting, but it misses something. The high case is a sensitivity. The supported central proposal is $240.
Send the $240 proposal, the range and the supporting assumptions
The strong move. This gives the controller the central change and what the rate uncertainty could do.
See how a strong candidate says it
“Keeping A fixed gives $1,330 to $1,570 at the two B rates. The central estimate is $1,490, or $240 above the current balance. The range of changes is $80 to $320. I would send those results and the inputs for approval.”
Why it works: The current balance and the revised estimate cover the same outstanding claims.
The answer, in short
- Decision
- Send the $1,490 estimate, the range and the $240 proposed change to the controller.
- Because
- Deduplication and settlement status change the claim counts. The new evidence for B changes its rate.
- What would change it
- A further change to a count, a supplied probability or the balance for this scope would change the proposal.
Common traps
- Count distinct outstanding claims.
- Compare the estimate and balance on the same scope.
Check your answer
- I calculated each cohort separately.
- I removed repeated IDs before changing any rate.
- I excluded posted credits and used the reviewed B rate.
- I sent the central change and sensitivity to the controller.
Last reviewed Nov 11, 2026