Question

A mail-order firm processes 5,600 checks per month. Of these, 60 percent are for $46 and 40 percent are for $78. The $46 checks are delayed three days on average; the $78 checks are delayed four days on average. Assume 30 days per month.

a-1.	What is the average daily collection float? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Average daily collection float

$

a-2.	How do you interpret your answer?

On average, there is $  that is (Click to select)collecteduncollected and (Click to select)not availableavailable to the firm.

b-1.	What is the weighted average delay? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Weighted average delay

days

b-2.	Calculate the average daily float. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Average daily float

$

   

c.	How much should the firm be willing to pay to eliminate the float? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Maximum payment

$

d.	If the interest rate is 7 percent per year, calculate the daily cost of the float. (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Daily cost of the float

$

e.	How much should the firm be willing to pay to reduce the weighted average float by 1.5 days? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Maximum payment

$

Answer 1