Purchase Solution

Float

Not what you're looking for?

Ask Custom Question

A mail order firm processes 5,000 checks per month. Of these, 65 percent are for $50 and 35 percent are for $70. The $50 checks are delayed two days on average; the $70 checks are delayed three days on average.
a. what is the average daily collection float? How do you interpret your answer?
b. What isthe weighted average delay? Use the result to 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 7 percent, calculate the 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?

Purchase this Solution

Solution Summary

The solution explains various calculations relating to float

Solution Preview

a. what is the average daily collection float? How do you interpret this answer?

The average daily float is the sum of the percentage each check amount is of the total checks received times the number of checks received times the amount of the check times the number of days until the check clears, divided by the number of days in a month. Assuming a 30 day month, we get:
Average daily float = [.65(5,000)($50)(2) + .35(5,000)($70)(3)]/30
Average daily float = $23,083

The interpretation is that on average, there is $23,083 that is uncollected and not available to ...

Purchase this Solution


Free BrainMass Quizzes
Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.