Reference no: EM133265509
Question: Accounts receivable changes with bad debts
A firm is evaluating an accounts receivable change that would increase bad debts from? 2% to 5?% of sales. Sales are currently 30,000 ?units, the selling price is? $20 per? unit, and the variable cost per unit is? $15. As a result of the proposed? change, sales are forecast to increase to 70,000 units.
a. are bad debts in dollars currently and under the proposed? change?
b. the cost of the marginal bad debts to the firm.
c. the additional profit contribution from increased? sales, if the proposed change saves? $3,500 and causes no change in the average investment in accounts? receivable, would you recommend? it?
d. all changes in costs and? benefits, would you recommend the proposed? change?
e. and discuss your answers in parts c and d.