SteelCo Production,Inc

question 23

Multiple Choice

SteelCo Production,Inc.is considering the use of a lock-box collection system.SteelCo's average check receipt is $1,350.The company invests excess cash in money-market certificates and receives an average of 3.5% annual interest.The lock-box system will speed up SteelCo's collections by 2.5 days.What is the maximum per check processing cost that SteelCo should be willing to pay for the lock-box system?

• A) $0.1871
• B) $0.2987
• C) $0.3236
• D) $0.4519

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Definitions:

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, resulting in market equilibrium.

Marginal Cost

The change in total cost that arises when the quantity produced is incremented by one unit.

Marginal Cost

The extra expense associated with the production of an additional unit of a product or service.

Equilibrium Price

A market condition's price point where the quantity of goods producers wish to sell equals the quantity consumers wish to buy.