Floral Beauty, Inc., is a large floral arrange- ments store located in Eastwood

Question

Floral Beauty, Inc., is a large floral arrange- ments store located in Eastwood Mall. Bridal Lilies, which are a specially created bunch of lilies for bridal bouquets, cost Floral Beauty $17 each. There is an annual demand for 24,000 Bridal Lilies. The manager of Floral Beauty has deter- mined that the ordering cost is $120 per order, and the carrying cost, as a percentage of the unit cost, is 18%. Floral Beauty is now considering a new supplier of Bridal Lilies. Each lily would cost only $16.50, but to get this discount, Floral Beauty would have to buy shipments of 3,000 Bridal Lilies at a time. Should Floral Beauty use the new sup- plier and take this discount for quantity buying?

Explanation / Answer

Without discount total cost payed = 120+24000*17+0.18(24000*17) =$481560 With discount total cost payed =120+24000*16.5*1.18=$467400 so discount should be taken

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