Forrester Fashions has monthly credit sales of

23,000

units with an average collection period of

60

days. The company has a per-unit variable cost of

19

and a per-unit sale price of

28.

Bad debts currently are

6%

of sales. The firm estimates that a proposed relaxation of credit standards would increase the average collection period to

82

days and would increase bad debts to

9%

of sales, which would rise to

34,500

units per month. Forrester's cost of capital is

1.0%

per month. Show all necessary calculations needed to evaluate Forrester's proposed relaxation of credit standards.

(Note:

Assume a 365-day year.)