Look again at Problem 21. Suppose (a) that it costs $95 to classify each new credit applicant and (b) that an almost equal proportion of new applicants falls into each of the four categories. In what circumstances should Mr. Khana not bother to undertake a credit check? 21. Jim Khana, the credit manager of Velcro Saddles, is reappraising the company's credit policy. Velcro sells on terms of net 30. Cost of goods sold is \(85\%\) of sales, and fixed costs are a further \(5\%\) of sales. Velcro classifies customers on a scale of 1 to 4. During the past five years, the collection experience was as follows:\begin{tabular}{|l|l|l|}\hline Classification & Defaults as Percent of Sales & Average Collection Period In Days for Nondefaulting Accounts \\\hline 1 & .0 & 45\\\hline 2 & 2.0 & 42\\\hline 3 & 10.0 & 40\\\hline 4 & 20.0 & 80\\\hline\end{tabular}The average interest rate was \(15\%\).What conclusions (if any) can you draw about Velcro's credit policy? What other factors should be taken into account before changing this policy?22. Look again at Problem 21. Suppose (a) that it costs \(\$ 95\) to classify each new credit applicant and (b) that an almost equal proportion of new applicants falls into each of the four categories. In what circumstances should Mr. Khana not bother to undertake a credit check?