Lockbox: 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 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 daily interest rate. The daily interest rate is 6% per year divided by 365 days, which is approximately 0.000164. Therefore, the savings are $18,100 * 2.2 * 0.000164 = $2,389.20.