Question

In: Finance

Cow Chips, Inc., a large fertilizer distributor based in California, is planning to use a lockbox...

Cow Chips, Inc., a large fertilizer distributor based in California, is planning to use a lockbox system to speed up collections from its customers located on the East Coast. A Philadelphia-area bank will provide this service for an annual fee of $8,000 paid at the end of the year plus 10 cents per transaction. The estimated reduction in collection and processing time is one day. Treasury bills are currently yielding 5 percent per year.

If the average customer payment in this region is $3,100, how many customers are needed, on average, each day to make the system profitable for the company? (Do not round intermediate calculations and round your answer up to the nearest whole number, e.g., 32.)

Solutions

Expert Solution

Ans :

Daily interest rate

(1+5%)^(1/365)-1 = 0.0133681%

Number of customer

(8000/5%)/(3100-0.10/0.0133681%) = 68.03

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Cow Chips, Inc., a large fertilizer distributor based in California, is planning to use a lockbox...
Cow Chips, Inc., a large fertilizer distributor based in California, is planning to use a lockbox system to speed up collections from its customers located on the East Coast. A Philadelphia-area bank will provide this service for an annual fee of $13,000 paid at the end of the year plus 15 cents per transaction. The estimated reduction in collection and processing time is one day. Treasury bills are currently yielding 5 percent per year. If the average customer payment in...
Sophisticates, Inc., a distributor of jewelry throughout California, is in the process of assembling a cash...
Sophisticates, Inc., a distributor of jewelry throughout California, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company’s accounting records: • All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 35 percent are collected in the following month. Uncollectibles amounting to 5 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding...
Sophisticates, Inc., a distributor of jewelry throughout California, is in the process of assembling a cash...
Sophisticates, Inc., a distributor of jewelry throughout California, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company’s accounting records: • All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 30 percent are collected in the following month. Uncollectibles amounting to 10 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding...
Sophisticates, Inc., a distributor of jewelry throughout California, is in the process of assembling a cash...
Sophisticates, Inc., a distributor of jewelry throughout California, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company’s accounting records: • All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 30 percent are collected in the following month. Uncollectibles amounting to 10 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding...
Sophisticates, Inc., a distributor of jewelry throughout California, is in the process of assembling a cash...
Sophisticates, Inc., a distributor of jewelry throughout California, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company’s accounting records: • All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 30 percent are collected in the following month. Uncollectibles amounting to 10 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding...
Multi-Screen TV, Inc., is a Cleveland i-based importer and distributor of large screen HDTVs for residential...
Multi-Screen TV, Inc., is a Cleveland i-based importer and distributor of large screen HDTVs for residential and commercial customers. Revenue and cost relations are as follows: TR = $1000Q - .1Q2 TC = $43,500 +100Q + 0.4Q2 A. Calculate output, marginal revenue, marginal cost, average cost, price, and profit at the average total cost-minimizing activity level. (Hint - MC passes through the minimum point on the ATC curve) B. Calculate these values at the profit-maximizing activity level. C. Compare and...
The Safeparts Company, a California-based distributor of automobile parts, recently conducted an inventory at its Los...
The Safeparts Company, a California-based distributor of automobile parts, recently conducted an inventory at its Los Angeles facility that showed inventory losses of $850,000. Concerned about the losses, management at Safeparts sought immediate action. You are a partner at Klein and Smith Loss Prevention Associates, a consulting firm. Safeparts executives contact you for assistance. A meeting is arranged. After competition with two other security and loss prevention firms, Safeparts executives decide on a 2-month contract for your firm’s services. You...
Bold Bodybuilders, Inc. is a large sporting goods store. It has become the exclusive distributor of...
Bold Bodybuilders, Inc. is a large sporting goods store. It has become the exclusive distributor of the new bodybuilding equipment called Geni. After carrying the equipment for a year, Joe Sabatini, a manager of the supply chain, decided to analyze the company's inventory policy for Geni. On the basis of the past year's record, Joe has identified the following weekly demand data: Weekly Demand Occurrence, Week 95 8 96 2 97 6 98 10 99 8 100 6 101 6...
Case Study: Heinkel-Fishbein, Inc.             Heinkel-Fishbein is a large importer and distributor of robotic toys. The...
Case Study: Heinkel-Fishbein, Inc.             Heinkel-Fishbein is a large importer and distributor of robotic toys. The toys are stored in the warehouse and are shipped to a several large retail chains at a unit price of $60. The retail stores sell the toys at $99.95, or at discounted prices on sale days. There is almost no possibility in the near future of changing the prices at which Heinkel-Fishbein supplies the retail stores.             Considering one toy, identified as SKU 2600,...
Sigma Company, a large manufacturer, is planning to sell an existing subsidiary and use the funds...
Sigma Company, a large manufacturer, is planning to sell an existing subsidiary and use the funds to buy land and build new factory. The proceeds of the sale are likely to be delayed, so the Directors have estimated that 10 million € will be needed in 3 months’ time for a period of 6 months. Given this, the directors have decided that a bank loan would be appropriate as a form of finance rather than equity sources. After checking that...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT