Question: 1 After being told that the guideline for bad debts

1. After being told that the guideline for bad debts for 1996 was to be $15 million, what should Walt do?
2. What are the risks for MCI in setting an unrealistic allowance for doubtful accounts?

Walt Pavlo joined MCI in the spring of 1992. At that time, MCI was a growth company in the booming long-distance telecommunications industry that had 15 percent of the long-distance market, with revenues of $11 billion.
In the 1990s the major telecommunications companies all shared their fiber-optic networks. This was more efficient than having each company lay its own network to every corner of the country. Each company would use the others’ networks in places where the former did not have cable and vice versa. The cost of routing a call through these fiber optic networks was measured in pennies per minute. However, MCI and the other telecommunication companies sold the right to use the network to their customers for dimes per minute.

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