Crystal Clear Company purchases 50,000 gallons of distilled water each year.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.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?

Question

Quizplus · Accepted Answer

The benefit of the discount exceeds the cost due to savings from the reduced price per gallon and the consideration of ordering and carrying costs.

Crystal Clear Company Purchases 50,000 Gallons of Distilled Water Each