If a purchase discount is taken:
1) There is a saving in purchase cost.
2) Ordering costs are reduced.
3) Carrying costs are increased.
4) There is not necessarily a net saving.
A) all the above are true
B) 2 and 3 are true
C) 3 and 4 are true
D) 2 and 4 are true

Question

Quizplus · Accepted Answer

1) Taking a purchase discount directly reduces the cost of purchases. 2) Ordering costs are not directly affected by purchase discounts, so this statement is incorrect in the context of the question. 3) Carrying costs are related to holding inventory and are not directly affected by purchase discounts. 4) While there is a saving in purchase cost, other costs or situations may offset this saving, making it not necessarily a net saving overall. However, the explanation provided in the choices seems to have a misunderstanding, leading to an incorrect conclusion. The correct understanding is that taking a purchase discount saves on purchase cost, but it doesn't directly affect ordering or carrying costs, and there might not be a net saving due to other factors. Therefore, the correct answer based on the most accurate interpretation of the effects of purchase discounts is that there is a saving in purchase cost, and there is not necessarily a net saving, making the correct statements 1 and 4. However, given the options provided and the explanations, there seems to be a mistake in my initial assessment. The correct interpretation should focus on the direct impact of purchase discounts, which is a saving in purchase cost, making 1 the primary correct statement. The confusion arises from the misinterpretation of the effects on ordering and carrying costs, which are not directly impacted by purchase discounts.

If a Purchase Discount Is Taken