Quantity Discount Calculator
Whether it is worth ordering a larger quantity to reach a supplier’s price break — the purchase saving over a year against the cost of holding the bigger stock, and the net.
A price break cuts the unit price for orders above a threshold, but buying more at a time means more stock on the shelf, and stock costs money — capital, space, risk — usually 15–30% of its value a year.
How the quantity discount calculator works
A price break cuts the unit price for orders above a threshold, but buying more at a time means more stock on the shelf, and stock costs money — capital, space, risk — usually 15–30% of its value a year. Compare the yearly purchase saving with the extra holding cost of the larger average inventory (half the order quantity); if the saving is bigger, take the break. Order cost changes too, because fewer orders are placed.
Formula: saving = demand × (p₁ − p₂); extra holding = h × (Q₂ p₂ − Q₁ p₁) ÷ 2; fewer orders = S × (D ÷ Q₁ − D ÷ Q₂)
Worked examples
| Inputs | Net yearly gain from taking the break | Note |
|---|---|---|
| 6,000 a year: 500 at 10 vs 1,500 at 9.40 | 3,079 | net +2,410 a year — take it |
| A small discount with high holding cost | -3,530 | net negative — stay |
| No holding cost counted | 2,000 | +2,000 |
FAQFrequently asked questions
What holding cost should I use?
Capital cost plus storage, insurance, shrinkage and obsolescence — usually 15–30% of the stock’s value a year, more for perishable or fast-changing goods. Ask finance for the figure the business uses.
Why half the order quantity?
Stock runs from the full order down to zero and is reordered, so the average on hand is half the order quantity. The extra holding cost is on the extra average stock at the new price.
What else should I consider?
Cash flow — a big order ties up money now; shelf life and the risk of the product changing; supplier reliability; and whether the discount is on the whole order or only units above the threshold.
Is there an optimum between the two?
Often the break quantity itself, because ordering more than the threshold adds holding cost without more discount. Compare a few candidate quantities; the EOQ with price breaks is the general method.
Where these figures come from
- Corporate Finance Institute — EBITDA — why EBITDA is a non-GAAP measure with no single definition
- US SEC — Non-GAAP Financial Measures, Compliance & Disclosure Interpretations — the disclosure rules that exist precisely because EBITDA is not standardized
- US Securities and Exchange Commission — the US securities regulator
Last checked: September 2026. These are standard management-accounting definitions; where a term has no single agreed definition, the page says so.