A firm is contemplating shortening its credit period from $40$ to $30$ days and believes$$ that, as a result of this$$change$,$ its average collection period will decline from $45$ to $35$ days. $$Bad$-$debt expenses are expected to decrease from $1\mathrm{.}4\%$ to $1\mathrm{.}1\%$ of sales. The firm is currently selling $12,500$ units but believes that as a result of the proposed$$ change, sales will decline to $10,400$ units. The sale price per unit is $$55,$ and the variable cost per unit is $$43.$ The firm has a required return on$$ equal$-$risk investments of $12\mathrm{.}2\%.$ Evaluate this$$ decision, and make a recommendation to the firm. $($Note$$: Assume a$365-$day year.$)$

What is the addtional profit contribution from incremental sales?

What is the amount of cost that will be saved due to the reduction in average accounts receivable?

What is the cost of a reduction in bad debts?