a. How much is the average daily collection float? b. If cash can be readily invested in instruments earning 5%, how much is the daily cost of the float? c. If STATE FARM can reduce the processing time of its checks by a day, and deposit it immediately, how much can it save in a year?
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- ABC Corporation receives checks from its customers. The total check value averages 700,000 each day. It takes an average of 5 days from deposits for these to clear the bank. If the bank offers to accelerate the 5-day clearing process to 3 days for a monthly fee of 600. If ABC can earn 4% investment income from excess cash, how much is the net annual benefits/cost of this bank offer?Inc. deals with various clients throughout the city and is attempting to collect its accounts receivable more efficiently. A major bank has offered a lock-box system for Bulldogs at a cost of P180,000 per year. Inc. averages 300 receipts daily at an average of P5,000 each. Short-term interest is at 8% annually. What reduction in average collection time would be needed to justify the lock-box system? (Use a 360-day year)NEKO Inc. deals with various clients throughout the city and is attempting to collect its accounts receivable more efficiently. A major bank has offered a lock-box system for NEKO at a cost of P180,000 per year. NEKO averages 300 receipts daily at an average of P5,000 each. Short-term interest is at 8% annually. What reduction in average collection time would be needed to justify the lock-box system? (Use a 360-day year)
- Inc. currently fills mail orders from all over the country and receipts were received in its head office. The company’s average accounts receivable is P3,125,000 and is financed by a bank loan with 10% interest. Inc. is considering a regional lockbox system to speed up collections. This system is projected to reduce the average accounts receivable by 15%. The annual cost of the lockbox system is P25,000. What is the estimated net annual savings in implementing the lockbox system? P28,455P22,985P25,750P21,875Bulldogs Inc. currently fills mail orders from all over the country and receipts were received in its head office. The company’s average accounts receivable is P3,125,000 and is financed by a bank loan with 10% interest. Bulldogs is considering a regional lockbox system to speed up collections. This system is projected to reduce the average accounts receivable by 15%. The annual cost of the lockbox system is P25,000. What is the estimated net annual savings in implementing the lockbox system? P22,985 P25,750 P28,455 P21,875Murkywater Company is considering a lockbox system. Its collection delay is currently 12 days. Reduction in mailing time = 1.5 day Reduction in clearing time = 1.5 day Reduction in firm processing time = 1.0 day Total = 4.0 days The following is also known: Daily interest on Treasury bills = 0.025% Average number of daily payments to lockboxes = 4,000 Average size of payment = $400 A local bank has agreed to operate this lockbox system for a fee of $0.25 per check processed. What are the costs associated with the proposal?
- Bulldogs Inc. deals with various clients throughout the city and is attempting to collect its accounts receivable more efficiently. A major bank has offered a lock-box system for Bulldogs at a cost of P180,000 per year. Bulldogs averages 300 receipts daily at an average of P5,000 each. Short-term interest is at 8% annually. What reduction in average collection time would be needed to justify the lock-box system? (Use a 360-day year)No need to type the word "Days" just the number e.g. X.XXMurkywater Company is considering a lockbox system. Its collection delay is currently 12 days. Reduction in mailing time = 1.5 day Reduction in clearing time = 1.5 day Reduction in firm processing time = 1.0 day Total = 4.0 days The following is also known: Daily interest on Treasury bills = 0.025% Average number of daily payments to lockboxes = 4,000 Average size of payment = $400 A local bank has agreed to operate this lockbox system for a fee of $0.25 per check processed. What are Murkywater’s average daily collections? Multiple Choice $1,600,000 $1,200,000 $1,000,000 $1,800,000 $1,400,000Bulldogs Inc. currently fills mail orders from all over the country and receipts were received in its head office. The company’s average accounts receivable is P3,125,000 and is financed by a bank loan with 10% interest. Bulldogs is considering a regional lockbox system to speed up collections. This system is projected to reduce the average accounts receivable by 15%. The annual cost of the lockbox system is P25,000. What is the estimated net annual savings in implementing the lockbox system? A. P25,750 B. P21,875 C. P22,985 D. P28,455
- A firm has daily cash receipts through checks. On average 150 checks are received per day while each check has an averagevalue of P2,500. It takes an average of 3 days for the bank to clear the checks. A bank has offered to decrease the clearingperiod to one day for a monthly fee of P500. The bank gives an interest rate of 3% per year. 1. How much is the decrease of the clearing float in days? 2. How much is the annual cost of the service? 3. What is the annual net benefit or (loss) from having this service?New-Markups Department Store has annual credit sales of $ 300 million. John Harris, the collection manager, has estimated that it takes 10 days for a mailed payment to be credited to Newman’s account and that this time can be cut to 5 days if Newman opens up a lockbox account with a local bank. The account in which the checks are placed earns 8.4% annually. The lockbox agreement calls for a monthly payment of $1,350 and, in addition, a monthly charge of $0.06 per check. Newman’s currently processes 120,000 checks monthly. (Treat these expenses as if they occur at the beginning of the year.) a) What are Newman’s daily sales (assuming a 360-day year) b) By how much will Newman’s average bank balance increase if it adopts the lockbox? c) Should Mr Harris adopt the lockbox ? d) Suppose Newman’s has found a regular 20% of its customers account for 80% of credit sales. Should Mr Harris open up the lockbox and use it only for this 20% of the customers?Osborne Shipbuilding Company, located in Baton Rouge, receives large remittances from its customers in New York and California. If the firm deposits these checks in its local bank, two business days are required for the checks toclear and the funds to become usable by the firm. However, if Osborne sends an employee to New York or Californiaand presents the check for payment at the bank upon which it is drawn, the funds are available immediately to thefirm. The firm can earn 8% per annum on short-term investments, and the cost of sending an employee to New Yorkor California to present the check for payment is $500. What is the net benefit to the firm of employing this specialhandling technique for a $5 million check received on Tuesday? (Assume 365 days per year.)