Accounts receivable changes with bad debts A firm is evaluating an accounts receivable change that would increase bad debts from 2% to 44% of sales. Sales are currently 50 comma 00050,000 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 comma 00080,000 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. a. The firm's current amount of bad debts in dollars is $nothing. (Round to the nearest dollar.)

a) curently                  $ 20,000

  proposed scenario $ 64,000

b)   differential               $ 44,000

c) and d)

differential contribution:

30,000 units x ($20 - 15) = 150,000

then, we subtract the 44,000 bad debt and add the 3,500 cost savings.

150,000 3,500 cost savings - 44,000 bad debt = 114,500

It would be recomented As with the contribution from sales will increase by 114,500

Step-by-step explanation:

expected sales 80,000 units  at $20 each

bad debt will be 4% os sales:

80,000 x $20 x 4% = $64,000

before, the bad debt were:

50,000 units at $20 with 2% bad dbet

50,000 x $20 x 0.02 = $20,000

answer: 1000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000

step-by-step explanation: