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

question 44

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 a bank loan with 11 percent annual interest. 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