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)
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)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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