Question
Sloan Products processes an average of 653,000 checks per year with an average payment amount of $88.00. Payments are received and processed 260 days per
Sloan Products processes an average of 653,000 checks per year with an average payment amount of $88.00. Payments are received and processed 260 days per year. A proposed lockbox system would reduce total float time by an average of 2.50 days, and would save Sloan $65,500/year of inhouse processing labor costs. The lockbox bank will charge a fee of $.16 per check processed and an annual service charge of $4,500. Stern has an opportunity cost of funds of 9.2%.
a. What is the gross benefit of the lockbox?
b. What is the total bank cost of the lockbox?
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