Arshadi Wineries Is Considering the Purchase of Lockbox Services from Bob's

question 244

Multiple Choice

Arshadi Wineries is considering the purchase of lockbox services from Bob's Bank. Currently, it
takes six days to collect funds from customers; this would be reduced by two days with the lockbox
system. The average number of payments received per day is 300 and the average cheque size is
$150. Bob's will charge 5¢ per cheque in return for operating the lockbox system. Assume one-year T-bills yield 5%, and use a 360-day year.
What is the smallest acceptable reduction in collection time that could occur, from the point-of-view
Of Arshadi Wineries that would make the lockbox acceptable?

• A) 2.00 days
• B) 2.25 days
• C) 2.50 days
• D) 2.75 days
• E) 3.00 days

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Definitions:

Customer Transaction

Any financial transaction or activity involving the sale of goods or services to customers.

Receive Payments

The process of recording the receipt of money from customers in payment for goods or services provided.

Customer Transactions

Financial interactions or operations between a business and its customers, including sales, returns, and payments.

Create Invoices

The process of generating billing documents for goods sold or services provided, detailing amounts owed by customers.