Relaxing Collection Efforts The Boyd Corporation has annual credit sales of $2.17 million. Current expenses for the coll

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Relaxing Collection Efforts
The Boyd Corporation has annual credit sales of $2.17 million.
Current expenses for the collection department are $35,000,
bad-debt losses are 1.5%, and the days sales outstanding is 30
days. The firm is considering easing its collection efforts such
that collection expenses will be reduced to $25,000 per year. The
change is expected to increase bad-debt losses to 2.5% and to
increase the days sales outstanding to 45 days. In addition, sales
are expected to increase to $2,195,000 per year. Suppose that the
opportunity cost of funds is 22%, the variable cost ratio is 67%,
and taxes are 40%. Assuming a 365-day year, calculate the cost of
carrying receivables under the current policy and the new policy.
Enter your answers as positive values. Do not round intermediate
calculations. Round your answers to the nearest dollar.
Current policy: $
New policy: $
Should the firm relax collection efforts?