Accounts receivable changes with bad debts A firm is evaluating an accounts recelvable change that...
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Accounts receivable changes with bad debts A firm is evaluating an accounts recelvable change that would increase bad debls trom 2% to 5% of sles Sales are currently 40,000 units, the selling price is $20 per unit, and the variable cost per unit is $15. As a result of the proposed chango, ates are forecasito increase to 60,000 units. a. What are bad debts in dollars currently and under the proposed change? b. Calculate the cost of the marginal bad debts to the firm. c. Ignoring the additional profit contribution from increased sales. it the proposed change saves $3,500 and causes no change in the nerage hrostment in accounts receivable, would you recommend it? d. Considering all changes in costs and benefits, would you recommind the proposed change? e. Compare and discuss your answers in parts c and d
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