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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.

Basic Finance, Finance

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