Tocor Is Considering the Implementation of a Lockbox Collection System

question 24

Multiple Choice

Tocor is considering the implementation of a lockbox collection system for its mid-western and western sales regions. Sales in those two regions are 30% of Tocor's annual sales of $560 million. The lockbox system will cost $187,000 a year and reduce collection time by 3 days. If Tocor could invest any released funds at 10.85%, should it use the lockbox system? Why or why not? (Assume 365 days per year.)

• A) Yes; savings of $149,819
• B) Yes; savings of $312,397
• C) No; loss of $37,181
• D) No; loss of $35,100

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Definitions:

Granite

Granite is a coarse-grained igneous rock comprised mainly of quartz, feldspar, and mica, known for its strength and widely used in construction and monuments.

Surface Area

The total area that the surface of an object occupies.

Fractured

Broken or cracked, often referring to rocks or geological features that have been subjected to stress leading to breakage.

Exposed Rock

Areas where bedrock is visible at the Earth’s surface, not covered by soil, vegetation, or water.