Bavarian Brew Float Bavarian Brew Receives About 350 Checks a Day with an Day

question 75

Multiple Choice

Bavarian Brew Float
Bavarian Brew receives about 350 checks a day with an average check size of $550. Currently customer’s payments spend 2 days in the mail. Once a check is received it takes about 1.5 days to process it and another 4 days to clear the banking system. The firm’s opportunity cost is 10%. Assume a 365-day year.

-Bavarian Brew is contemplating implementing a lockbox system that would decrease the collection float by 2 days.What would be the most the company should be willing to pay on an annual basis for the system?

• A) $96,250
• B) $482,500
• C) $38,500
• D) $48,125

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Definitions:

Visible Spectrum

The narrow band of light waves that are visible to the human eye.

Light

Electromagnetic radiation within a certain portion of the electromagnetic spectrum, perceived by the human eye.

Just Noticeable Difference

The smallest change in stimulation that a person can reliably detect.

Weber's Law

A principle stating that the smallest noticeable difference in stimulus intensity is a constant proportion of the intensity of the initial stimulus.