What-If Analysis As the management accountant for the Tyson Company you have been asked to construct 1 answer below »

What-If Analysis As the management accountant for the Tyson Company you have been asked to construct a financial planning model for collection of accounts receivable and then to perform a what-if analysis in terms of the assumption regarding estimated uncollectible accounts. You are provided with the following information:

Collection Pattern for Credit Sales: 75 percent of the company’s credit sales are collected in the month of sale, 20 percent in the month following month of sale, and 5 percent are uncollectible.

Credit Sales: January 2010, $100,000; February 2010, $120,000; March 2010, $110,000.

Required

What is meant by the term what-if analysis?

Generate a spreadsheet model regarding estimated bad debts expense under the following assumptions regarding the rate of uncollectible accounts: 1 percent, 3 percent, 5 percent (base case), and 8 percent. Prepare an estimate of bad debts expense for each of three months, January through March, and for the quarter as a whole.

What is the value to Tyson Company of creating a model and then performing the what-if analysis described above?