Jane Marks has a restaurant in which she accepts credit cards and checks. Severa
ID: 2760723 • Letter: J
Question
Jane Marks has a restaurant in which she accepts credit cards and checks. Several of the places that Jane shops now accept debit cards and do not accept checks. Jane's banker explained that a debit card would immediately transfer money into her account, but it would cost $50 per month for the equipment and bank charges. Although she requires proper identification, Jane loses approximately $590 a year as a result of bad checks. She also determined that on average she loses 115 days of interest on all checks because the banks are closed on 11 holidays and weekends (52 weeks times 2 weekend days = 104 + 11 holidays). Jane currently earns 3 percent interest on her bank accounts and accepts an average of $2,000 a day in checks.
a. What is the total annual cost to Jane for the debit card service?
b. What is the benefit?
c. Should Jane implement the system?
Explanation / Answer
a. What is the total annual cost to Jane for the debit card service?
The Answer is 12 * $ 50 = $ 600
b. What is the benefit?
The Answer as follows:
Savings due to avoid the bad checks = $ 590
Interest on $ 2,000 for 115 days @ 3% = $ 6,900
Total saving due to debit cards service= $ 7,490
Less: Cost of debit service = $ 600
Net Benefit = $ 6,890.
c. Should Jane implement the system?
The Answer is that, based on the above analysis, Jane benifited and implement the system.
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