What the reduction in profit contribution from a decline

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Point 1: Shortening the credit period - A firm is contemplating shortening its credit period from 30 to 20 days and believes that, as a result of this change, its average collection period will decline from 37 to 26 days. Bad - debt expenses are expected to decrease from 1.4% to 0.9% of sales. The firm is currently selling 12,100 units but believes that as a result of the proposed change, sales will decline to 10,200 units. The sale price per unit is $54, and the variable cost per unit is $45. The firm has a required return on equal - risk investments of 12.4%. Evaluate this decision and make recommendation to the firm (Note: assume a 365-day year).

Question 1: What The reduction in profit contribution from a decline in sales is

 

Reference no: EM132490222

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