Collection expenses ILLUSTRATION 18 Mosaic Limited has current sales of 15 lakhs per year. Cost of sales is 75 per cent of sales and bad debts are one per cent of sales. Cost of sales comprises 80 per cent variable costs and 20 per cent fixed costs, while the company's required rate of return is 12 per cent. Mosaic Limited currently allows customers 30 days credit, but is considering increasing this to 60 days' credit in order to increase sales. It has been estimated that this change in policy will increase sales by 15 per cent, while bad debts will increase from one per cent to four per cent It is not expected that the policy change will result in an increase in fixed costs and creditors and stock will be unchanged. Should Mosaic Limited introduce the proposed policy? (Assume a 360 days year)