Accounts receivable changes with bad debts A firm is evaluating an accounts receivable change that would increase bad debts from 2% to 4% of sales. Sales are currently 40,000 units per month, 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 per month. If the cost of capital is 0.75% per month, should the firm change its credit policy? The cost of the marginal bad debts of the firm is $ 40000. (Round to the nearest dollar.) The profit contribution from an increase in sales is $. (Round to the nearest dollar.)
Accounts receivable changes with bad debts A firm is evaluating an accounts receivable change that would increase bad debts from 2% to 4% of sales. Sales are currently 40,000 units per month, 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 per month. If the cost of capital is 0.75% per month, should the firm change its credit policy? The cost of the marginal bad debts of the firm is $ 40000. (Round to the nearest dollar.) The profit contribution from an increase in sales is $. (Round to the nearest dollar.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Accounts receivable changes with bad debts A firm is evaluating an accounts receivable change that would increase bad debts from 2% to 4% of sales. Sales are currently 40,000 units per month, 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 per month. If the cost of capital is 0.75% per month, should
the firm change its credit policy?
The cost of the marginal bad debts of the firm is $40000. (Round to the nearest dollar.)
The profit contribution from an increase in sales is $
(Round to the nearest dollar.)
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