A supplier offers a quantity discount. Which of the following will influence the decision to accept the discount or not?
A) purchase cost
B) cost of carrying inventory
C) cost of placing one order
D) all of the above are relevant
E) none of the above is relevant

Question

Quizplus · Accepted Answer

All of the given factors are relevant in influencing the decision to accept or reject a quantity discount. The purchase cost is directly related to the pricing of the product and is a key factor in determining the cost savings from the discount. The cost of carrying inventory must also be considered, as purchasing a large quantity of items may lead to an increase in storage costs, such as rent or utilities, as well as potential inventory spoilage or obsolescence. Lastly, the cost of placing an order may also be affected, as ordering in larger quantities may reduce the frequency of orders, consequently reducing the cost of each transaction.

A Supplier Offers a Quantity Discount