Germanos Group is evaluating an accounts receivable change that would increase bad debts from 5% to 10% of sales. Sales are currently 100,000 units of batteries, the selling price €25 per unit, and the variable cost per unit is €15. As a result of the proposed change, sales are forecast to increase by 20,000 units.

a. What are bad debts in euros currently and after the proposed change?

b. Calculate the cost of the marginal bad debts for Germanos.

c. Ignoring the additional profit contribution for the increased sales, if the proposed change saves €50,000 and causes no change in the average investment in accounts receivable, would you recommend it? Explain.

d. Considering all changes in costs and benefits, should the change be made? Explain.

e. Compare and discuss your answers in parts c and d.