A Zack Firm is evaluating an Accounts Receivable Change that would increase Bad Debts from 2% to 4% of Sales. Sales are currently 50,000 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 60,000 units. A. What are Bad Debts in Dollars currently? (Format: 11,111) B. What are Bad Debts in Dollars under the Proposed Change? (Format: 11,111) C. Calculate the Cost of the Marginal Bad Debts to the firm. (Format: 11,111)

A Zack Firm is evaluating an Accounts Receivable Change that would increase Bad Debts from 2% to 4% of Sales. Sales are currently 50,000 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 60,000 units. A. What are Bad Debts in Dollars currently? (Format: 11,111) B. What are Bad Debts in Dollars under the Proposed Change? (Format: 11,111) C. Calculate the Cost of the Marginal Bad Debts to the firm. (Format: 11,111)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 25P

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A firm is evaluating an Accounts Receivable Change that would increase Bad Debts from 2% to 4% of Sales. Sales are currently 50,000 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 60,000 units. D. Ignoring 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? (Format: Yes or No) E. Considering all changes in Costs and Benefits, would you recommend the proposed change? (Format: Yes or No)
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