The Lawrence Stone-Age Pottery Co. receives 50 cheques per month from customers. Average payments and clearing times are as follows: ﬁve cheques for $21,000, two days; 15 cheques for
$58,000, three days; 25 cheques for $37,000, four days; and ﬁve cheques for $10,000, ﬁve days.
Assume a 360-day year.
What is the weighted average ﬂoat in receiving the funds?

Question

Quizplus · Accepted Answer

To calculate the weighted average float, first, we need to calculate the total value of cheques and total float:
Total Value of cheques: 
= (5 * $21,000) + (15 * $58,000) + (25 * $37,000) + (5 * $10,000) 
= $1,540,000

Total Float: 
= [(5 * 2) + (15 * 3) + (25 * 4) + (5 * 5)] / 50 
= 3.6 days

Weighted Average Float = Total Float / Total Value of cheques * 360 
= 3.6 / $1,540,000 * 360 
= 0.1054

Therefore, the weighted average float in receiving the funds is approximately 3.47 days (0.1054 rounded to two decimal places). The best choice is option B.