What are the expected annual savings from a lock-box system that collects 150 cheques per day averaging $500 each, and reduces mailing and processing times by 2.5 and 1.5 days respectively, if the annual interest rate is 7 percent?

Question

Quizplus · Accepted Answer

The lock-box system speeds up the collection process by 4 days (2.5 + 1.5). The daily collection is 150 cheques * $500 = $75,000. The annual savings from the reduced collection time is $75,000 * 4 days * 0.07 (annual interest rate) = $21,000.

What Are the Expected Annual Savings from a Lock-Box System