A purchasing department aims to maintain a constant closing inventory of material M. The production budget increases significantly each month. If the supplier offers a large quantity discount for bulk purchases, the optimal strategy, disregarding inventory capacity, would likely lead to:

Question

Economics · Inventory Management

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Correct answer

Increased reorder quantity to maximise the total value of discount.

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Answer 1

Increased ordering frequency to match the production increase.

Answer 2

Increased reorder quantity to maximise the total value of discount.

Answer 3

A lower Economic Order Quantity (EOQ) due to the higher holding cost.

Answer 4

A decreased holding period to reduce inventory valuation.

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