Cross Collectibles Currently Fills Mail Orders from All Over the U.S.and

question 62

Multiple Choice

Cross Collectibles currently fills mail orders from all over the U.S.and receipts come in to headquarters in Little Rock,Arkansas.The firm's average accounts receivable (A/R) is $2.5 million and is financed by an 11 percent annual,simple interest bank loan.Cross is considering a regional lockbox system to speed up collections which it believes will reduce A/R by 20 percent.The annual cost of the system is $15,000.What is the estimated net annual savings to the firm from implementing the lockbox system?

• A) $500,000
• B) $30,000
• C) $60,000
• D) $55,000
• E) $40,000

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Definitions:

Values

Representations of the importance, worth, or usefulness of something, often guiding decision-making and behavior.

Reservation Price

The highest amount a customer is prepared to spend on a product or service.

English Auction

A type of auction in which the price ascends with each subsequent bid, and the highest bidder wins.

Willingness To Pay

The maximum amount an individual is ready to spend to acquire a good or service or to avoid something undesirable.