Suppose the Campus Bookstore Purchases 50,000 Boxes of Writing Tablets

question 19

Multiple Choice

Suppose the Campus Bookstore purchases 50,000 boxes of writing tablets every year. Ordering costs are $100 per order and carrying costs are
$0) 40 per box. Moreover, management has determined that the EOQ is 5,000 boxes. The vendor now offers a quantity discount of $0.20 per box if the company buys tablets in order sizes of 10,000 boxes. Determine the before-tax benefit or loss of accepting the quantity discount. (Assume the carrying cost remains at $0.40 per box whether or not the discount is taken.)

• A) $1,000 loss
• B) $1,000 benefit
• C) $ 500 loss
• D) $ 500 benefit
• E) $ 0 (The change would not affect profits.)