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Lock Box Systems

The firm collects Rs 4,00,000 per day. The proposed lock box system would reduce mailing time by 4 days and cheque clearing time by 3 days, saving Rs 12,00,000 (4,00,000 * 7 days) per year. The annual cost of the system is Rs 3,00,000 which is less than the annual savings, so it is recommended that the firm install the proposed lock box system.

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391 views

Lock Box Systems

The firm collects Rs 4,00,000 per day. The proposed lock box system would reduce mailing time by 4 days and cheque clearing time by 3 days, saving Rs 12,00,000 (4,00,000 * 7 days) per year. The annual cost of the system is Rs 3,00,000 which is less than the annual savings, so it is recommended that the firm install the proposed lock box system.

Uploaded by

narunsankar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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A firm having an annual opportunity cost of 15 per cent is

contemplating installation of a lock box system at an annual cost of Rs


3, 00,000. The system is expected to reduce mailing time by 4 days
and reduce cheque clearing time by 3 days. If the firm collects Rs 4,
00,000 per day, would you recommend the system?

Thus, it is recommended that the proposed lock box system should be


installed.

Beta Ltd. has an annual turnover of Rs 84 crores and the same is


spread evenly over each of the 50 weeks of the working year. However,
the pattern within each week is that the daily rate of receipts on
Mondays and Tuesdays is twice that experienced on the other three
days of the week.

The cost of banking per day is estimated at Rs 2,500. It is suggested


that banking should be done daily or twice a week Tuesdays and
Fridays as compared to the current practice of banking only on
Fridays. Beta Ltd. always operates on bank overdraft and the current
rate of interest is 15% per annum.
This interest charge is applied by the bank on a simple daily basis.
Ignoring taxation, advise Beta Ltd. the best course of banking. For
your exercise, use 360 days a year for computational purposes.

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