The supplier for Alpha Corporation has offered the company a 5 percent discount if it will order more units less frequently.If Alpha accepts the supplier's offer,the cost of carrying inventory will _ and the cost of running out of inventory will _.

A) rise,stay the same
B) fall,decrease
C) rise,decrease
D) fall,stay the same

Question

The supplier for Alpha Corporation has offered the company a 5 percent discount if it will order more units less frequently.If Alpha accepts the supplier's offer,the cost of carrying inventory will _____ and the cost of running out of inventory will _____.

A) rise,stay the same
B) fall,decrease
C) rise,decrease
D) fall,stay the same

Matthew Dwinell · Accepted Answer

Final Answer : C, Explanation :  Ordering more units less frequently with a discount decreases the cost per unit, but it increases the inventory holding costs due to larger quantities being stored. However, having more inventory on hand reduces the risk of stockouts, thereby decreasing the cost associated with running out of inventory.

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