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Problem 3 Krisa Corporation sells to national market and bills all credit customers from the Makati office. Using a continuous billing system, the firm has
Problem 3 Krisa Corporation sells to national market and bills all credit customers from the Makati office. Using a continuous billing system, the firm has a collection of P600,000 per day. Under consideration is a concentration banking system that would require customers to mail payments to the nearest regional office to be deposited in the local banks. Krisa estimates that the collection period for accounts will be shortened by an average of 3 days under this system. The firm also estimates that annual service charges and administrative costs of P 300,000 will result from the proposed system. The firm can earn 12% on equal-risk investment.Required: 1 How much cash will be made available for other uses if the firm accepts the proposed concentration banking? 2. What savings will the firm realized on the 3 days reduction in the collection period? 3. The net benefit ( cost ) of the concentration banking
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