Sarah is a buyer for a department store. A supplier offers her a 5 percent discount if

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Sarah is a buyer for a department store. A supplier offers her a 5 percent discount if she triples her usual order quantity. Which of the following best explains why Sarah should take the deal? 

a. Even though the increase in the operating costs is likely to exceed the benefit of the 5 percent discount, Sarah feels that her customers expect the lowest possible price. 

b. Sarah hopes that customers are likely to purchase more if they see an increase in the inventory in the store. 

c. Sarah knows that even though she may triple her order quantity, this would increase her operating costs by far less than a factor of three. 

d. Sarah knows that the sum of operating costs is probably less than 5 percent of the purchase cost, so an increase in the operating costs is unlikely to be a concern.

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Operations Management

ISBN: 9781260547610

2nd International Edition

Authors: Gerard Cachon, Christian Terwiesch

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