Burke Corporation Is Investigating a Lockbox System to Reduce Its

question 297

Multiple Choice

Burke Corporation is investigating a lockbox system to reduce its collection time. It has determined that on average, there are 900 payments with an average value of $425 each. If a lockbox system
Is implemented, the lockbox fee per transaction will be $0.15. If the collection time can be reduced
By 4 days, and the daily interest on money market securities is .02%, then determine the present
Value of adopting the system.

• A) $1,170,000
• B) $1,260,000
• C) $1,350,000
• D) $1,440,000
• E) $1,530,000

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Definitions:

Ending Inventory

The total value of all unsold goods remaining at the end of an accounting period.

Product B

A placeholder name often used to refer to a secondary product in examples or case studies.

Sales on Account

Transactions where goods or services are sold and payment is deferred, creating accounts receivable.

Merchandise

Goods bought and sold by retailers.