Electronic Funds Transfer: Porter Company has just signed up for an electronic funds transfer system. Management expects the system to reduce the processing time by 2.3 days. The company's existing sales by cheque only average $41,250 a day, with the average cheque being $165. With the new electronic funds transfer system the bank will charge $0.39 per sale. Assume that there are 270 business days in a year and their opportunity cost of funds is 5 per cent. What will the company's savings be from using the new system?

Question

Quizplus · Accepted Answer

The company's savings will be from the reduction in processing time and the bank charges. The reduction in processing time will save the company $41,250 x 2.3 days x 270 business days = $26,737.50 per year. The bank charges will be $0.39 per sale x 41,250 sales per day x 270 business days = $41,812.50 per year. The total savings will be $26,737.50 + $41,812.50 = $68,550.00 per year.

Electronic Funds Transfer: Porter Company Has Just Signed Up for an Electronic