Cross Collectibles Currently Fills Mail Orders from All Over the U.S.and

question 62

Multiple Choice

Cross Collectibles currently fills mail orders from all over the U.S.and receipts come in to headquarters in Little Rock,Arkansas.The firm's average accounts receivable (A/R) is $2.5 million and is financed by an 11 percent annual,simple interest bank loan.Cross is considering a regional lockbox system to speed up collections which it believes will reduce A/R by 20 percent.The annual cost of the system is $15,000.What is the estimated net annual savings to the firm from implementing the lockbox system?

• A) $500,000
• B) $30,000
• C) $60,000
• D) $55,000
• E) $40,000

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Definitions:

February

The second month of the Gregorian calendar, known for having 28 days in common years and 29 days in leap years.

Direct Materials Purchases

The total amount of raw materials bought by a company for use in production during a specific accounting period.

Material B

A generic term often used to denote a specific type of material used in the manufacturing or production process.

Budgeted Total Sales

The estimated total revenue that a business plans to generate from goods or services sold within a specific period.