Question

When a supplier offers a lower price for a larger quantity, the buyer should: _________

a) Always take the quantity discount.
b) Never take the quantity discount.
c) Determine the return on investment.
d) Order according to the eoq model.
e) Determine the preference of senior management.

Answer 1

The correct option is (c)

Step-by-step explanation:

Return on investment measures the attractiveness with respect to an investment. It evaluates the efficiency of a particular investment as compared to other investment opportunities.

It is computed by subtracting cost of investment from current value and divide the result by the cost.

In this case, buyer should estimate the return on investment in purchasing larger quantity to get discount and compare it with other investment opportunities. If it offers higher returns, then the buyer should go for this.