Henleigh Hill, CFO of HH Corp., uses a decentralized company processing center for check collection....
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Henleigh Hill, CFO of HH Corp., uses a decentralized company processing center for check collection. She estimates that the total annual cost of collections is currently $300,000. Henleigh is considering switching to a centralized company processing center, but she is worried about the required increase in fixed costs. Use the following assumptions to determine the maximum fixed cost of the central-ized company processing center that would make Henleigh indifferent between a decentralized or centralized company processing center.Number of checks processed per year = 450,000Average face value of checks = $1,000Collection float for centralized processing = five daysVariable processing cost per check for centralized processing = $0.25Opportunity cost rate = 5 percent
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