Question: Lockboxes and Collection time Bird's Eye Tree houses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania

Lockboxes and Collection time Bird's Eye Tree houses, Inc., a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system offered by a bank located in Pittsburgh. The bank has estimated that use of the system will reduce collection time by two days. Based on the following information, should the lockbox system be adopted?

Average number of payments per day Average value of payment 400 S1,200 Variable lockbox fee (per transaction) $ 35 Annua

How would your answer change if there were a fixed charge of $6,000 per year in addition to the variable charge?

Average number of payments per day Average value of payment 400 S1,200 Variable lockbox fee (per transaction) $ 35 Annual interest rate on money market securities 6.0%

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