You are the junior controller at Gibson Guitars and Accessories, a large manufacturing company with multiple locations. Last month, the owners explored the possibility of extending their current receivable policy from 30 to 45 days, in order to increase sales. They are currently selling tuners for $10 per unit. Current sales (all on credit) are 65,000 units. The variable cost per unit is $6. The firms total fixed costs are $130,000 with 365 days in the year. The firm is currently contemplating a relaxation of credit standards that is expected to result in the following: a 10% increase in unit sales to 71,500 units; an increase in the average collection period from 30 days (the current level) to 45 days; The average cost of financing is 7%; an increase in bad-debt expenses from 1% of sales (the current level) to 2%. YOUR CHALLENGE: The CFO has asked you to analyze the effects of relaxing the credit standards (what happens to profit and other costs) and help determine if this is a good strategy. Include your calculations and decision in the space below.