Asked by Jayla Ashley on Jul 14, 2024
Verified
The Baker Co. receives an average of 230 cheques a day. The average amount per cheque is $1,150. The firm is considering a lockbox system which it anticipates will reduce the average collection time by 3 days. The bank charges $.25 a cheque for this service. The daily interest rate on Treasury bills is.008 %. What is the average daily cost of the lockbox system?
A) $57.50
B) $63.48
C) $77.78
D) $115.00
E) $172.50
Average Daily Cost
The average cost incurred by a business or an individual on a daily basis.
Lockbox System
A service provided by banks to process payments by diverting them directly to a special post office box, speeding up the collection process.
Cheques
Cheques are written, dated, and signed instruments that direct a bank to pay a specific sum of money from the cheque writer's account to the person or entity in whose name the cheque has been issued.
- Gain an understanding and perform calculations to assess the value enhancements of lockbox systems through net present value analysis.
- Compute the cost-benefit analysis of lockbox systems, considering the impact of banking fees and shortened collection durations.
Verified Answer
LA
Linda ArriolaJul 18, 2024
Final Answer :
A
Explanation :
The average daily cost of the lockbox system is calculated by multiplying the number of cheques received daily by the fee per cheque: 230 cheques/day * $0.25/cheque = $57.50/day.
Learning Objectives
- Gain an understanding and perform calculations to assess the value enhancements of lockbox systems through net present value analysis.
- Compute the cost-benefit analysis of lockbox systems, considering the impact of banking fees and shortened collection durations.