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it is an Accounting question .

Attempts: 0 Keep the Highest: 0/3 1. Problem 22-05 (Relaxing Collection Efforts) eBook 1 Problem Walk-Through Relaxing Collection Efforts The Boyd Corporation has annual credit sales of $2.72 million. Current expenses for the collection department are $45,000, bad-debt losses are 2%, and the days sales outstanding is 30 days. The firm is considering easing its collection efforts such that collection expenses will be reduced to $27,000 per year. The change is expected to increase bad-debt losses to 3% and to increase the days sales outstanding to 45 days. In addition, sales are expected to increase to $2,745,000 per year. Suppose that the opportunity cost of funds is 14%, the variable cost ratio is 71%, and taxes are 40%. Assuming a 365-day year, calculate the cost of carrying receivables under the current policy and the new policy. Enter your answers as positive values. Do not round intermediate calculations. Round your answers to the nearest dollar. Current policy: $ New policy: $ Should the firm relax collection efforts? The firm should relax its collection efforts. Grade It Now Save & Continue Continue without saving eBook Problem Walk-Through Tightening Credit Terms Kim Mitchell, the new credit manager of the Vinson Corporation, was alarmed to find that Vinson sells on credit terms of net 90 days while industry-wide credit terms have recently been lowered to net 30 days. On annual credit sales of $2.77 million, Vinson currently averages 95 days of sales in accounts receivable. Mitchell estimates that tightening the credit terms to 30 days would reduce annual sales to $2,645,000, but accounts receivable would drop to 35 days of sales and the savings on Investment in them should more than overcome any loss in profit. Vinson's variable cost ratio is 83%, taxes are 40%, and the interest rate on funds invested in receivables is 23%. Assuming a 365-day year, calculate the cost of carrying receivables under the current policy and the new policy. Enter your answers as positive values. Do not round intermediate calculations. Round your answers to the nearest dollar. Current policy: $ New policy: $ Should the change in credit terms be made? -Select- Grade It Now Save & Continue 11:41