Your average customer is located 2.9 mailing days away from your office. On average, it takes your staff 1.1 days to process incoming payments and an average of .65 days for your funds to be available for use once you have made your bank deposit. What is your total collection time if 98 percent of your customers pay by mail while the others drop their payment off at your office?

Question

Quizplus · Accepted Answer

The total collection time for mailed payments is the sum of the mailing days, processing time, and the time for funds to become available: 2.9 (mailing days) + 1.1 (processing time) + 0.65 (funds availability) = 4.65 days. Since 98% of customers pay by mail, their collection time is 4.65 days. The remaining 2% who drop off their payment have no mailing days, so their collection time is 1.1 (processing time) + 0.65 (funds availability) = 1.75 days. The weighted average collection time is (0.98 * 4.65) + (0.02 * 1.75) = 4.59 days.

Your Average Customer Is Located 2