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Simon Electronics is evaluating whether a lockbox it is currently using is worth keeping. Management acknowledges that the lockbox reduces the mail float by 1.5
Simon Electronics is evaluating whether a lockbox it is currently using is worth keeping. Management acknowledges that the lockbox reduces the mail float by 1.5 days and processing time by half a day. The remittances average $100,000 a day for Simon Electronics, with the average check being $1,000. The bank charges $0.30 per processed check. Assume that there are 270 business days in a year and that it costs Simon 5 percent to finance accounts receivable. Should Simon Electronics keep the lockbox?
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