Forrester Fashions has annual credit sales of 270,000 units with an average collection period of...
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Forrester Fashions has annual credit sales of 270,000 units with an average collection period of 69 days. The company has a per-unit variable cost of $23 and a per-unit sale price of $34.50. Bad debts currently are 6% of sales. The firm estimates that a proposed relaxation of credit standards would not affect its 69-day average collection period but would increase bad debts to 9.00% of sales, which would increase to 324,000 units per year. Forrester requires a 10% return on investments. Show all necessary calculations required to evaluate Forrester's proposed relaxation of credit standards. (Note: Assume a 365-day year.)
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