On average, your ﬁrm receives 50 checks a day from customers. These checks, on average, are worth $20 each and clear the bank in 4 days. In addition, your ﬁrm mails out 40 checks a day with
An average amount of $30. These checks clear your bank in 3 days. What is the average amount of
The collection ﬂoat?

Question

Quizplus · Accepted Answer

First, we need to calculate the average collection float for checks received from customers:
50 checks/day x $20/check = $1,000/day
$1,000/day x 4 days to clear = $4,000 float

Next, we need to calculate the average collection float for checks mailed out by the firm:
40 checks/day x $30/check = $1,200/day
$1,200/day x 3 days to clear = $3,600 float

Finally, we add the two floats together:
$4,000 + $3,600 = $7,600
$7,600 / 2 (because we are taking the average of two floats) = $3,800

Therefore, the average collection float is $3,800, which corresponds to answer choice C.

On Average, Your ﬁRm Receives 50 Checks a Day from Customers