A mail-order firm processes 5,500 checks per month. Of these, 60 percent are for $42 and...

A mail-order firm processes 5,500 checks per month. Of these, 60 percent are for $42 and 40 percent are for $77. The $42 checks are delayed two days on average; the $77 checks are delayed three days on average. Assume 30 days in a month.

a-1 What is the average daily collection float? a-2 How do you interpret your answer?

b-1 What is the weighted average delay?

b-2 Calculate the average daily float. c. How much should the firm be willing to pay to eliminate the float? d. If the interest rate is 5 percent per year, calculate the daily cost of the float. e. How much should the firm be willing to pay to reduce the weighted average float to 1.5 days?

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