. Suppose the Campus Bookstore purchases 50,000 boxes of writing tablets every y

Question

. Suppose the Campus Bookstore purchases 50,000 boxes of writing tablets every year. Ordering costs are $100 per order and carrying costs are $0.40 per box. Moreover, management has determined that the EOQ is 5,000 boxes. The vendor now offers a quantity discount of $0.20 per box if the company buys tablets in order sizes of 10,000 boxes. Determine the before-tax benefit or loss of accepting the quantity discount. (Assume the carrying cost remains at $0.40 per box whether or not the discount is taken.)

a. $1,000 loss

b. $1,000 benefit

c. $ 500 loss

d. $ 500 benefit

e. $ 0 (The change would not affect profits.)

Explanation / Answer

d. $ 500 benefit

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