P15-12-shortening the credit period- A firm is contemplating shorting its credit period from 35 to 25 days and believers that, as a result of this change, its average collection period will decline from 41 to 33 days. Bad-debt expenses are expected to decrease from 1.6% to 0.9% of sales. The firm is currently selling 11,600 units but believers that the sales will decline to 9,500 units as a result of the proposed changes. The sales price per unit is $58, and the variable cost per unit is $47. The firm has a required return on equal-risk investments of 25%. Evaluate this decision and make a recommendation of the firm. (Note; assume a 365-day year.)

The reduction in profit contribution from a decline in sales is -23,100.

The benefit from the reduce marginal investment in A/R is $________

Cost of marginal bad debts:

bad debts, proposed plan $_______.

bad debts, present plan $_________

Net benefit from implementing proposed plan $___________

Should the proposal be recommended?