Asked by ?????? ??????? on Jul 01, 2024
Crystal Clear Company purchases 50,000 litres of distilled water each year.Ordering costs are $100 per order,and the carrying cost,as a percentage of inventory value,is 80%.The purchase price to CCC is $0.50 per litre.Management currently orders the EOQ each time an order is placed.No safety stock is carried.The supplier is now offering a quantity discount of $0.03 per litre if CCC orders 10,000 litres at a time.Should CCC take the discount?
A) No, the cost exceeds the benefit by $500.
B) No, the cost exceeds the benefit by $1,000.
C) Yes, the benefit exceeds the cost by $500.
D) Yes, the benefit exceeds the cost by $1,120.
Quantity Discount
A reduction in price offered to a buyer when purchasing goods in larger quantities, serving as an incentive for bulk purchases.
Carrying Cost
The total cost of holding a particular asset on a company’s books, which can include storage, interest, depreciation, and insurance.
Distilled Water
Distilled water is water that has been purified through distillation, a process that involves boiling the water and then condensing the steam back into liquid.
- Assess the benefits and considerations of quantity discounts in inventory management.
Learning Objectives
- Assess the benefits and considerations of quantity discounts in inventory management.
Related questions
When Quantity Discounts Are Allowed, the Cost-Minimizing Order Quantity ...
A Product Whose EOQ Is 40 Experiences a Decrease in ...
Discount Taken by the Buyer for Early Payment of Invoice \quad ...
Early Payment Discount Offered to Customers by the Seller \quad Freight ...
A Price Discount Where the Pricing Schedule Offers Discounts Based ...