Exhibit 28.3 Assume That Palmer Executive Pens Uses 1,440,000 Gallons of Ink

Multiple Choice

Exhibit 28.3
Assume that Palmer Executive Pens uses 1,440,000 gallons of ink each year. Further, assume that Palmer can order the ink at a cost of $2 per gallon plus fixed ordering costs of $100 per order. The firm's carrying cost is 20 percent of the inventory value, at cost.
-Refer to Exhibit 28.3.Now,suppose the manufacturer offers a discount of 0.5 percent for orders of a least 40,000 gallons.Should Palmer increase its ordering quantity to take the discount?

A) Yes;it will save $827 if it takes the discount.
B) No;it will lose $827 if it takes the discount.
C) Yes;it will save $14,400 if it takes the discount.
D) Yes;it will save $13,573 if it takes the discount.
E) No;it will lose $13,573 if it takes the discount.