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A Company is trying to decide whether it should relax its credit standards. The firm sells 72,000 units per year at an average price of

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A Company is trying to decide whether it should relax its credit standards. The firm sells 72,000 units per year at an average price of $32 per unit. The average collection period is 40 days, and the variable cost per unit is $26. The company expects that if it does relax its credit standards, the average collection period will increase to become 48 days, the change in sales will be an increase by 4,000 units per year, the change in bad-debt expenses will be an increase from 1% of sales (under present plan) to 2% of sales (under proposed plan). The firm has a required rate of return on equal-risk investments of 14%. (360 the number of days assumed in a year). Fill the Answer for each of the following: Additional profit contribution from sales Profit contribution per unit Total additional profit contribution cost of marginal investment in A/R Total variable cost of annual sales - Under present plan Total variable cost of annual sales Under proposed plan Turnover of A/R Under present plan Turnover of A/R Under proposed plan Average investments in A/R Under present plan Average investments in A/R Under proposed plan Marginal Investment in AVR Cost of marginal investment in A/R Cost of marginal bad debts

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