Accounts receivable alters with bad debt- A firm is measuring an accounts change which would raise the bad debts from 2% to 4% of sales. Sales are currently 50,000 units, the selling price is $20 for each unit, and the variable cost for each unit is $15. As a result of the proposed change, sales are forecasted to raise to 60,000 units

a) Compute bad debts in dollars currently and under the proposed change?

b) Compute the cost of managerial bad debt to the firm.

c) Ignoring the additional profit contributions from raised sales, if the proposed change saves $3,500 and causes no change in average investment in accounts receivable, would you suggest it? Describe.

d) Considering all changes in costs and advantages, would you suggest the proposed change? Describe.

c) Compare and describe your answers in part c and d.