You Are Considering Implementing a Lockbox System for Your Firm

question 163

Multiple Choice

You are considering implementing a lockbox system for your firm. The system is expected to reduce the collection time by 1 day. On an average day, your firm receives 90 checks with an average value of $105 each. The daily interest rate on Treasury bills is.03 %. The bank charge per check would be $.25. What is the anticipated daily cost of the lockbox system?

• A) $2.70
• B) $2.84
• C) $12.60
• D) $22.50
• E) $26.25

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Definitions:

Incentive

A factor, either monetary or non-monetary, that motivates individuals or entities to perform an action or engage in a certain behavior.

Long Run

A period of time in economics sufficient for all markets to adjust to changes, including those of supply and demand.

Economic Profits

The total revenue of a business minus its explicit and implicit costs; a measure of incremental gain over the total costs, including opportunity costs.

Supply Curve

A graph showing the relationship between the price of a good and the quantity supplied by producers.