Carl's Cakes sells to its customers on terms of 1/10 net 30. All sales are on credit, and 15% of customers take the discount. The rest pay, on average, in 35 days. Carl forecasts sales of $2,500,000 for next year, but believes that if he had a larger discount and more liberal credit terms, sales would be $3,800,000. The proposal is to have terms of 3/10 net 40; 35% of customers would take the discount, and the rest would pay in 40 days. All sales will be on credit, but bad debts will decrease from 3% to only 1.5%. Carl's contribution margin of 20% will hold with the increase in sales, and his cost of financing short term assets is 12%. The change in contribution margin is: $260,000 O$1,300,000 O$1,040,000 O$760,000 The change in discount expense is: (36,150) 36,150 (955,000) 955,000 The change in bad debt expense is: 18,000 (18,000) (39,000) 39,000