Rusli Ltd provides a car valet service for car-hire businesses when their cars are returned from hire. Details of the service costs are as follows:

Sales revenue is £10 million a year and is all on credit. The average credit period taken by Rusli Ltd’s customers is 45 days, although the terms of credit state that payment should be made within 30 days. Bad debts are currently £100,000 a year. Trade receivables are financed by a bank overdraft costing 10 per cent a year.
Rusli Ltd’s credit control department believes it can completely eliminate bad debts and can reduce the average credit period to 30 days if new credit control procedures are implemented. These will cost £50,000 a year and are likely to result in a loss of business leading to a reduction in sales revenue of 5 per cent a year.
Should Rusli Ltd implement the new credit control procedures?

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Car valet charge Variable costs Fixed costs Profit Per car (14) (4)