Credit Policy. Nelson Corporation reports the following information: Selling price per unit       $70 Variable cost per unit     $45 Fixed cost per unit           $15 Annual credit sales         ...

Credit Policy. Nelson Corporation reports the following information:

Selling price per unit       $70

Variable cost per unit     $45

Fixed cost per unit           $15

Annual credit sales          400,000 units

Collection period              3 months

Rate of return                   19%

The company is considering easing its credit standards. If it does, the following is expected to result: Sales will increase by 25 percent; collection period will increase to 4 months; bad debt losses are anticipated to be 4 percent on the incremental sales; and collection costs will increase by $34,000.

Should the proposed relaxation in credit standards be implemented?