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Problem regarding the production and cresit sales

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Reference no: EM131074011

The Pettit Corporation has annual credit sales of $2 million. Current ex- penses for the collection department are $30,000, bad debt losses are 2 percent, and the DSO is 30 days. Pettit is considering easing its collection efforts so that collection expenses will be reduced to $22000 per year. The change is expected to increased bad debt losses to 3% and to increase the DSO to 45 days. In addition sales are expected to increase to $2.2 million per year. Should Pettit relax collection is 12% the varibale coat ratio is 75% and its margin tax rate is 40%? All costs associated with production and cresit sales are paid on the day of the sale.

Reference no: EM131074011

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