Accounts receivable changes with bad debts A firm is evaluating an accounts receivable change that would increase bad

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Accounts receivable changes with bad debts   A firm is
evaluating an accounts receivable change that would increase bad
debts from​ 2% to
5​%
of sales. Sales are currently
30,000
​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
80,000
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, if the proposed change saves​ $3,500
and causes no change in the average investment in
accounts​ receivable, would you recommend​ it?
d.  Considering all changes in costs and​ benefits, would
you recommend the proposed​ change?
e.  Compare and discuss your answers in parts c and
d.
Question content area bottom
Part 1
a.  The​ firm's current amount of bad debts in dollars
is
​$enter your response here.
  ​(Round to the nearest​ dollar.)
Part 2
The​ firm's forecast amount of bad debts in dollars under
the proposed plan is
​$enter your response here.
​ (Round to the nearest​ dollar.)
Part 3
b.  The cost of the marginal bad debts of the firm is
​$enter your response here.
  ​(Round to the nearest​ dollar.)
Part 4
c.  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?  
▼
No
Yes
​, since the cost of marginal bad debts is
▼
greater
less
than the savings of​ $3,500.  ​(Select from
the​ drop-down menus.)
Part 5
d. Considering all changes in costs and​ benefits, would
you recommend the proposed​ change?
▼
No
Yes
​, since the cost of marginal bad debts is
▼
greater
less
than the total savings of
​$253,500.
​(Select from the​ drop-down menus.)
Part 6
e.  Compare and discuss your answers in parts c and
d.
Which of the following statements is​ true?  ​(Select the
best answer​ below.)
A.
You should recommend this policy change because it increases
sales.
B.
You should recommend this policy change because the total
savings are less than the cost of the marginal bad debts.
C.
You should recommend this policy change because the savings that
include additional profit from incremental sales are greater than
the cost of the marginal bad debts.
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.