Your project requires 1,200 linear feet of rebar. The supplier offers a 5% discount for orders over 1,500 linear feet. Additional rebar costs $3.50 per linear foot. Should you order the minimum for the discount?
Correct Answer
D) Depends on the original price per linear foot
To determine if ordering extra material for the discount is worthwhile, you need to know the original price per linear foot to calculate if the 5% discount on the total order exceeds the cost of purchasing an additional 300 linear feet.
Why This Is the Correct Answer
Option D is correct because the decision to order extra material for a discount requires a cost-benefit analysis that compares the total savings from the discount against the additional cost of the extra material. Without knowing the original price per linear foot, you cannot calculate whether the 5% discount on 1,500 linear feet exceeds the cost of purchasing an additional 300 linear feet at $3.50 each. The original price is the critical missing variable needed to make this financial decision.
Why the Other Options Are Wrong
Option A: Yes, if the discount is greater than 6%
Option A is wrong because it arbitrarily sets a 6% threshold without considering the actual cost comparison. The decision should be based on whether the total dollar savings from the 5% discount exceeds the additional $1,050 cost (300 ft × $3.50), not on comparing discount percentages.
Option B: No, the extra cost exceeds potential savings
Option B is wrong because it makes a definitive conclusion without having all the necessary information. We cannot determine if the extra cost exceeds potential savings without knowing the original price per linear foot to calculate the actual dollar amount of the 5% discount.
Option C: Yes, if you have storage space available
Option C is wrong because while storage space is a practical consideration, it doesn't address the fundamental financial question. Even with adequate storage, you still need to determine if the discount savings justify the additional purchase cost before making the decision.
Memory Technique
Remember 'PRICE FIRST' - you need the original Price to calculate if a discount Really makes sense, before Investing in Extra material for Cost savings.
Reference Hint
Florida Building Contractors Reference Manual - Chapter on Cost Estimating and Material Procurement
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