The Stetson Co

question 315

Multiple Choice

The Stetson Co. receives an average of 340 checks a day. The average amount per check is $750. The firm is considering a lockbox system which it anticipates will reduce the average collection time
By 2 days. The bank charges $.15 a check for this service. The daily interest rate on Treasury bills is
) 006 percent. What is the average daily cost of the lockbox system?

• A) $13.50
• B) $27.00
• C) $51.00
• D) $112.50
• E) $229.50

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Definitions:

Gross Profit

The financial metric indicating the difference between revenue and the cost of goods sold, showcasing how efficiently a company is producing or sourcing its products.

Contribution Margin Ratio

The percentage of each sales dollar that remains after variable costs are subtracted, contributing to covering fixed costs and profit.

Margin Of Safety Ratio

A financial metric that indicates how much sales can decline before a business reaches its break-even point.

Costs And Expenses Ratio

A financial metric that compares the costs and expenses of a company to its total revenue, indicating the efficiency of its operations.