A firm is evaluating an accounts receivable change that would increase bad debts from$2\%$ to $5\%$ 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. If the cost of capital is$0\mathrm{.}75\%$ per$$ month, should the firm change its credit$$ policy?

a$.$ Calculate the cost of the marginal bad debts to the firm.

b$.$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$?$

c$.$Considering all changes in costs and$$ benefits, would you recommend the proposed$$ change?

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