NARRBEGIN: Bavarian Credit Terms

NARRBEGIN: Bavarian Credit Terms
Bavarian Brew Credit Terms
Bavarian Brew is producing and selling brewery equipment to microbreweries nationwide.Bavarian is charging $15,000 per unit and all of their sales are on credit.Under the current credit policy Bavarian Brew expects to sell 500 units.The variable costs are $6,000/unit and fixed costs are $1,500,000 per year.The company is thinking about changing their credit terms from net 30 to 3/10 net 30.The effect of this change would be a 5% increase in unit sales,but also an increase in bad debt expenses from 2% to 4% of sales.The company expects 75% of its customers to take advantage of the cash discount.Currently the company has an average collection period of 38 days,30 days until the customers mail their payments and another 8 days to process the payments once they arrive.Bavarian Brew's opportunity cost of funds invested in accounts receivable is 12%.
-What is Bavarian Brew's cost savings from the reduced investment in accounts receivables if they implement the new credit terms?

A) $13,660
B) $113,836
C) $19,493
D) $98,521