Problem: A company has five remittances for the typical month as listed below. Assume the typical month has 30 days. The day of mail, processing, and availability float for each remittance are also shown. Under the firm's current system, remittances of $1 million or more receive expedited processing, while all other remittances receive standard processing.
Remittance Mail Float Processing Float Availability Float
$ 500,000 5 1 2
$ 100,000 2 2 1
$ 50,000 5 1 2
$1,000,000 3 0.5 0
$ 25,000 1 2 2
1) Calculate the total dollar-day float for the month.
2) Calculate the average dollar-day float.
3) Calculate the average collection float in days.
4) If the annual opportunity rate is 5%, calculate the annual cost of float.