A supplier is offering a price discount if more is ordered at one time. The offer should be analyzed to determine if a larger order is appropriate considering:
A.
the impact of the increase in average inventory levels on ABC designations
B.
the reduction in material cost compared to the impact on total holding costs
C.
the impact of additional items on indirect costs
D.
the increase in transportation costs compared to the reduction in ordering cost
The reduction in material cost compared to the impact on total holding costs, is a fundamental consideration when assessing the appropriateness of a larger order.
When a supplier offers a price discount for larger orders, the decision should be based on comparing the reduction in material cost with the potential impact on total holding costs. This analysis helps to determine if the savings from the price discount outweigh the additional costs incurred by holding more inventory.
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