Accounts receivable changes with bad debts

Ratings: 1 Star2 Stars3 Stars4 Stars5 Stars (5.00 out of 5) - Rate Now!
Loading...

Download Category:

Bad Debt s.zip - (141.56 KB)
[
Bad Debt s/Bad Debts.docx
Bad Debt s/Question.txt
Bad Debt s/Screenshot_1.png
]Bad Debt s.zip - (141.56 KB)
[
Bad Debt s/Bad Debts.docx
Bad Debt s/Question.txt
Bad Debt s/Screenshot_1.png
]

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.

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? Explain.

Get a fresh solution of this question. Ask it now to our experts.
doubt

Ask Your Question

We have verified professionals who are ready to answer your question.

time

Save Time and Money

We choose experts who can quickly answer your question and that suit your budget.

download

Get Your Answer

Your satisfaction is 100% guaranteed. You can keep on asking questions until you get the answer you need.