Create an Account

Already have account?

Forgot Your Password ?

Home / Questions / A The monthly total cost for your companys cash collection system Total Variable costs F...

A The monthly total cost for your companys cash collection system Total Variable costs Fixed costs Number of remittances Face value total float days opportunity cost Bank charge

A) The monthly total cost for your company's cash collection system:-

= Total Variable costs + Fixed costs

= Number of remittances * [(Face value * total float days * opportunity cost) + Bank charges] + Fixed costs

= 2000 * [ 10000 * 10(NOTE 1) * 0.05 / 365 + 0.25 ] + 300

= 2000 * [ 10000 * 10 * 0.0001369863 + 0.25 ] + 300

= 2000 * [13.69863 + 0.25 ] + 300

= 2000 * 13.94863 + 300

= $ 28197.26 (approx)

(NOTE 1):- Total Float Days = 4 + 3 + 3 = 10 Days

B) The monthly total cost for your company's cash collection system if you opt fot lock box service:

= Total Variable costs + Total Fixed costs

= Number of remittances * [(Face value * total float days * opportunity cost) + Bank charges] + Fixed costs

= 2000 * [ 10000 * 4(NOTE 2) * 0.05 / 365 + 0.40 ] + 400

= 2000 * [ 10000 * 4 * 0.0001369863 + 0.40 ] + 400

= 2000 * [5.479452 + 0.40 ] + 400

= 2000 * 5.879452 + 400

= $ 12158.90 (approx)

(NOTE 2):- Total Float Days = [10 - (4 + 1 +1) ] = 4 Days.

C) Yes, I will opt for the Lockbox service as the total cost for optiong lockbox service ($ 12158.90) is less than that the total cost computed in part A ($ 28197.26).

 

Sep 04 2020 View more View Less

Answer (Solved)

question Subscribe To Get Solution

Related Questions