Question
Asked Dec 14, 2019
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Rocor is considering the implementation of a lockbox collection system for its mid-western and western sales regions. Sales in those two regions are 30 percent of Tocor's annual sales of $560 million. The lockbox system will cost $187,000 a year and reduce collection by time by 3 days. If Tocor could invets any released funds at 10.85 percent, should it use the lockbox system and what would be the savings/loss. Assume 365 days per year.

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Expert Answer

Step 1

Given that the annual sales is $560 million

Step 2

Now, sales in western region is 30% of total annual sales, so the sales will be 30% multiplied by $560 million which is equal to $168 million.

Step 3

As per the question, the Lock box system will reduce the coll...

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