2B5G POWELL INDUSTRIES DEALS WITH CUSTOMERS THROUGHOUT THE COUNTRY AN...
142.
CSO: 2B5b
LOS: 2B5g
Powell Industries deals with customers throughout the country and is attempting to more
efficiently collect its accounts receivable. A major bank has offered to develop and
operate a lock-box system for Powell at a cost of $90,000 per year. Powell averages 300
receipts per day at an average of $2,500 each. Its short-term interest cost is 8% per year.
Using a 360-day year, what reduction in average collection time would be needed in
order to justify the lock-box system?
a.
0.67 days.
b.
1.20 days.
c.
1.25 days.
d.
1.50 days.