Rocky Corp. has daily sales of $18,100. The financial manager determined that a lockbox would reduce the collection time by 2.2 days. Assuming the company can earn 6 percent interest per year, what are the savings from the lockbox? Round your final answer to the nearest dollar.

Question

Quizplus · Accepted Answer

The savings from the lockbox can be calculated by multiplying the daily sales by the reduction in collection time and the interest rate. The annual interest rate is 6%, so the daily interest rate is 6% / 365 = 0.016438% per day. The savings are calculated as $18,100 * 2.2 days * 0.06 / 365 = $2,389 (rounded to the nearest dollar).