16.Kelly manufacturing is contemplating the institution of stricter collection policies. The firms current sales are 720000 a year. With collection cost of 20000 annually, bad debt losses are currently 4 percent of sales and the average collection period is 60 days. Kelly believes that by spending an addition 20000 it can reduce bad debt losses to 2 percent of sales and reduce the average collection period to 35 days. However, the stricter policies are expected to reduce sales by 50000 a year. If variable costs are 70 percent of sales and Kelly has an opportunity cost of 20 percent, should the stricter terms be implemented

16.Kelly manufacturing is contemplating the institution of stricter collection policies. The firms current sales are 720000 a year. With collection cost of 20000 annually, bad debt losses are currently 4 percent of sales and the average collection period is 60 days. Kelly believes that by spending an addition 20000 it can reduce bad debt losses to 2 percent of sales and reduce the average collection period to 35 days. However, the stricter policies are expected to reduce sales by 50000 a year. If variable costs are 70 percent of sales and Kelly has an opportunity cost of 20 percent, should the stricter terms be implemented

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