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A company buys 200 metric tons of ethylene per month.

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A company buys 200 metric tons of ethylene per month. The firm has a one-year agreement with Supplier X to buy the ethylene at $1000 per metric ton. After 3 months, the market price drops to $900 per metric ton, and the firm renegotiates the price to $890 per metric ton for the remaining contract term.

What savings should be reported?

A.

$264,000 cost reduction and $240,000 cost avoidance

B.

$18,000 cost reduction and $180,000 cost avoidance

C.

$24,000 cost reduction and $240,000 cost avoidance

D.

$198,000 cost reduction and $198,000 cost avoidance

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