When evaluating whether to accept a bulk purchase discount from a supplier, which of the following financial trade-offs must be assessed?

Correct answer: B) The savings in purchase price and ordering costs against the increase in total holding costs.

Explanation

Buying in bulk reduces the unit purchase price and decreases the number of orders placed per year (saving ordering costs). However, because larger quantities arrive at once, the average inventory increases, which drives up holding costs. The decision relies on calculating if the savings outweigh the extra holding costs.