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Accounts receivable changes with bad debts A firm is evaluating an accounts currently 30,000 units, the selling price is $20 per unit, and the variable cost i receivable change that would increase bad debts tom 2% to 5%of Sales per unit is $15. As a result of the proposed change, sales are forecast to Increase to Sales are 70,000 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 receivable, would you recommend it? d. Considering alil changes in costs and benefits, would you recommend the proposed change? e. Compare and discuss your answers in parts c and d additional proft contribution from increased sales, if the proposed change saves $3,500 and causes no change in the average investment in accounts d. Considering all changes in costs and benefits, would you recommend the proposed change? V.since the cost of marginal bad debts is than the total savings of $203,500 (Select from the drop-down menus.) e. Compare and discuss your answers in parts c and d. Which of the following statements is true? (Select the best answer below ) d A. You should recommend this policy change because it increases sales. O B. You should recommend this policy change because the total savings are less than the cost of the marginal bad debts O C. You should recommend this policy change because the savings that include additional profit trom incremental sales are greater than the cost of the marginal D. You should recommend this policy change because the savings that exclude additional profit from increased sales are greater than the cost of the marginal bad debts. bad debts

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