Forrester Fashions has monthly credit sales of

24,000

units with an average collection period of

65

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

16

and a per-unit sale price of

26.

Bad debts currently are

5%

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

84

days and would increase bad debts to

7.5%

of sales, which would rise to

36,000

units per month. Forrester's cost of capital is

0.9%

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

(Note:

Assume a 365-day year.)