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 in a month. a-1. What is the average daily collection float? (Do not round intermediate calculations.) Average daily collection float a-2. How do you interpret your answer? (Do not round intermediate calculations.) On average, there is that is and to the firm

Answer 1

Please find below table useful to compute desired results: -

5600 78 B 1 Checks processed per month 2 Check amount 3 %age =60/100 4 Delayed 5 Days in Month 6 a-1 Average Daily Collection Float =(B3*Cl*B2*B4)+(C3*C1*C2*C4))/B5 =40/100 7 2-2 On Average, there is $38,752 that is Uncollected and not available to the firm 8 Total Collections =B3*C1*B2+C3*C1*C2 9 6 -1 Weighted Average Delay =B6*B5/BS days 10 6 - 2 Average Daily Float =B9*B8/B5 11 C Maximum Payment =B10 12 Given Rate= =7/100 13 r= =(1+B12) (1/365)-1 14 d Daily Cost of Float =B6*B13 15 e New Average Daily Float =(B9-1.5)*B8/30

End results would be as follows: -

BC 1 Checks processed per month 5,600 2 Check amount 46 78 3 %age 60% 40% 4 Delayed 5 Days in Month 30 6 a-1 Average Daily Collection Float 38,752 a-2 On Average, there is $38,752 that is Uncollected 7 and not available to the firm 8 Total Collections 329,280 9 1-1 Weighted Average Delay 3.53 days 10 1-2 Average Daily Float 38,752 11 c Maximum Payment 38,752 12 Given Rate= 7% 13 r= 0.01854% 14 d Daily Cost of Float 7.18 15 e New Average Daily Float 22,288