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Just need to know if the info I entered is correct AND if they should tighten collection efforts YES or NO and why? 2. The
Just need to know if the info I entered is correct AND if they should tighten collection efforts YES or NO and why?
2. The Sleep Corp has annual credit sales of $5 million. Current expenses for the collection department are $10,000, bad-debt losses are 2.5%, and the days sales outstanding is 62 days. The firm is considering tightening its collection efforts such that collection expenses will be increased to $38,000 per year. The change is expected to decrease bad-debt losses to 1.5% and to decrease the days' sales outstanding to 30 days. In addition, sales are expected to decrease to $4.8 million per year. Should the firm tighten collection efforts if the opportunity cost of funds is 16%, the variable cost ratio is 75%, and taxes are 25%Step by Step Solution
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