Bad debt losses average approximately

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Reference no: EM131518866

Boyd Inc. has annual credit sale of $1.6 million. Their current Collection Expenses = $35,000 and their bad debt losses average approximately 1.5%. The firm is considering easing collection efforts and moving from a Days Sales Outstanding of 30 days to allowing DSO to increase to 45 days. They believe that this change will increase sales to $1,625,000; however Bad debt losses will also increase to 2.5%. The collection expenses for this new collection policy will be $22,000. If the firm has an opportunity cost of 16%, a variable cost ratio of 75% and taxes at 40%, should they make the change?

Reference no: EM131518866

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