23 Jul WHAT IS THE EFFECT OF CREDIT POLICY CHANGE?
The Boyd Corporation has annual credit sales of $1.6 million. Current expenses for the collection de Show more The Boyd Corporation has annual credit sales of $1.6 million. Current expenses for the collection department are $38000 bad-debt losses are 1.5% and the days sales outstanding is 30 days. The firm is considering easing its collection efforts such that collection expenses will be reduced to $22000 per year. The change is expected to increase bad-debt losses to 2.5% and to increase the days sales outstanding to 45 days. In addition sales are expected to increase to $1675000 per year. Assume a 365-day year. Should the firm relax collection efforts if the opportunity cost of funds is 18% the variable cost ratio is 60% and taxes are 35%? What is the effect of credit policy change? Do not round intermediate steps. Round your answer to the nearest dollar. Net income changed by ? Show less
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