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

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 $0.02 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. )