Colla Company had annual sales of 2,500,000. Its average collection period is 45 days, and bad debts are 3 percent of sales. The credit and collection manager is considering instituting a stricter collection policy, whereby bad debts would be reduced to 1.5 percent of total sales, and the average collection period would fall to 30 days. However, sales would also fall by an estimated 300,000 annually. Variable costs are75 percent of sales and the cost of carrying receivables is 10 percent. Assume a tax rate of 40 percent and 360 days per year. What would be the decrease in investment in receivables if the change were made?

11. Colla Company had annual sales of 2,500,000. Its average collection period is 45 days, and bad debts are 3 percent of sales. The credit and collection manager is considering instituting a stricter collection policy, whereby bad debts would be reduced to 1.5 percent of total sales, and the average collection period would fall to 30 days. However, sales would also fall by an estimated 300,000 annually. Variable costs are 75 percent of sales and the cost of carrying receivables is 10 percent. Assume a tax rate of 40 percent and 360 days per year. What would be the decrease in investment in receivables if the change were made