CMA Study Group

Hi,
Can Someone help me with this question?

Powell Industries deals with customers throughout the country and is attempting to more efficiently collect its accounts receivable. A major bank has offered to develop and operate a lock-box system for Powell at a cost of $90,000 per year. Powell averages 300 receipts per day at an average of $2,500 each. Its short-term interest cost is 8% per year. Using a 360-day year, what reduction in average collection time would be needed in order to justify the lock-box system?

a. 0.67 days.

b. 1.20 days.

c. 1.25 days.

d. 1.50 days.

Thank you,
Yajna

Hi,
Can Someone help me with this question?

Powell Industries deals with customers throughout the country and is attempting to more efficiently collect its accounts receivable. A major bank has offered to develop and operate a lock-box system for Powell at a cost of $90,000 per year. Powell averages 300 receipts per day at an average of $2,500 each. Its short-term interest cost is 8% per year. Using a 360-day year, what reduction in average collection time would be needed in order to justify the lock-box system?

a. 0.67 days.

b. 1.20 days.

c. 1.25 days.

d. 1.50 days.

Thank you,
Yajna

Hi,
Can Someone help me with this question?

Powell Industries deals with customers throughout the country and is attempting to more efficiently collect its accounts receivable. A major bank has offered to develop and operate a lock-box system for Powell at a cost of $90,000 per year. Powell averages 300 receipts per day at an average of $2,500 each. Its short-term interest cost is 8% per year. Using a 360-day year, what reduction in average collection time would be needed in order to justify the lock-box system?

a. 0.67 days.

b. 1.20 days.

c. 1.25 days.

d. 1.50 days.

Thank you,
Yajna

Hi,
Can Someone help me with this question?

Powell Industries deals with customers throughout the country and is attempting to more efficiently collect its accounts receivable. A major bank has offered to develop and operate a lock-box system for Powell at a cost of $90,000 per year. Powell averages 300 receipts per day at an average of $2,500 each. Its short-term interest cost is 8% per year. Using a 360-day year, what reduction in average collection time would be needed in order to justify the lock-box system?

a. 0.67 days.

b. 1.20 days.

c. 1.25 days.

d. 1.50 days.

Thank you,
Yajna