4. Crystal Clear Company purchases 50,000 gallons of distilled water each year.

Question

4. Crystal Clear Company purchases 50,000 gallons of distilled water each year. Ordering costs are $100 per order, and the carrying cost, as a percentage of inventory value, is 80 percent. The purchase price to CCC is $0.50 per gallon. 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 gallon if CCC orders 10,000 gallons at a time. Should CCC take the discount?

a. From a cost standpoint, CCC is indifferent.


b. No, the cost exceeds the benefit by $500.

c. No, the cost exceeds the benefit by $1,000.

d. Yes, the benefit exceeds the cost by $500.

e. Yes, the benefit exceeds the cost by $1,120.

Explanation / Answer

c. No, the cost exceeds the benefit by $1,000.

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.