Each Year, Holly's Best Salad Dressing, Inc

Multiple Choice

Each year, Holly's Best Salad Dressing, Inc. (HBSD) purchases 50,000 gallons of extra virgin olive oil. Ordering costs are $100 per order, and the carrying cost, as a percentage of inventory value, is 80 percent. The purchase price to HBSD is $0.50 per gallon. Management currently orders the EOQ each time an order is placed. No safety stock is carried. The supplier is now offering a quantity discount of $0.03 per gallon if HBSD orders 10,000 gallons at a time. Should HBSD take the discount?

A) from a cost standpoint, hbsd is indifferent.
B) no, the cost exceeds the benefit by $500.
C) no, the cost exceeds the benefit by $1,000.
D) yes, the benefit exceeds the cost by $500.
E) yes, the benefit exceeds the cost by $1,120.