Spokane Company uses a lock box in Seattle. They process $500,000 in checks a day, and the average check size is $250. The process saves two days in float and one day in processing. The bank charges 5 cents per check. There are 270 business days in the year. The company figures it costs them 4% to carry the accounts receivable. Which method is better: lock box or carrying the accounts for an extra 2.5 days?
Answer is as follows:
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