When quantity discounts are allowed, the cost-minimizing order quantity:
A) is always an EOQ quantity.
B) minimizes the sum of holding and ordering costs.
C) minimizes the unit purchase price.
D) may be a quantity below that at which one qualifies for that price.
E) minimizes the sum of holding, ordering, and product costs.

Question

Quizplus · Accepted Answer

Quantity discounts impact the total cost by affecting the product cost component in addition to holding and ordering costs. The cost-minimizing order quantity, therefore, minimizes the sum of all three costs: holding, ordering, and product costs.

When Quantity Discounts Are Allowed, the Cost-Minimizing Order Quantity