How Much Time Must Be Saved to Justify a Lock-Box

How much time must be saved to justify a lock-box system that processes 350 cheques per day at an average amount of $400 per cheque if the system will cost $20,000 annually and interest rates average 8 percent?

A) 0.56 days
B) 1.79 days
C) 2.14 days
D) 7.00 days break-even point for system = $20,000/.08 = $250,000
Thus, the system must reduce collection float by $250,000.
300 cheques x $400 per cheque x days saved = $250,000

Correct Answer:

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