Question
Your firm sells to wholesalers nationwide. Your bank has just completed a lockbox study of your cash collection system. After a thorough study of your
Your firm sells to wholesalers nationwide. Your bank has just completed a lockbox study of your cash collection system. After a thorough study of your remittance information, they categorized your customers into three groups as shown below. Your annual opportunity cost of funds is 5%.
Customer Group # of Remittances Average Face Value Bank A Float Bank B Float Bank C Float 1 1,000 $150,000 4 2 2 2 2,000 $300,000 2 5 6 3 3,000 $28,000 4 6 3 Variable Cost $0.20 $0.50 $0.70 Fixed Cost $300 $400 $150
Use the complete enumeration model to determine the optimal number of lockbox sites and the customer allocation among the chosen sites.
Which of the following one-bank lockbox systems has the lowest total cost?
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