Examples of quantity discount in the following topics:
-
- Quantity discounts are reductions in base price given as the result of a buyer purchasing some predetermined quantity of merchandise.
- A noncumulative quantity discount applies to each purchase and is intended to encourage buyers to make larger purchases.
- A cumulative quantity discount applies to the total bought over a period of time.
- For example, a 2% discount on bills paid within 10 days is a cash discount.
- Trade discounts are often combined to include a series of functions, for example 20/12/5 could indicate a 20% discount for warehousing the product, an additional 12% discount for shipping the product, and an additional 5% discount for keeping the shelves stocked.
-
- Order batching occurs when each member takes order quantities it receives from its downstream customer and rounds up or down to suit production constraints such as equipment setup times or truckload quantities.
- The more members who conduct such rounding of order quantities, the more distortion occurs of the original quantities that were demanded.
- Price fluctuations due to inflationary factors, quantity discounts, or sales tend to encourage customers to buy larger quantities than they require.
- Stabilize prices by replacing sales and discounts with consistent "every-day low prices" at the consumer stage and uniform wholesale pricing at upstream stages.
- Such actions remove price as a variable in determining order quantities.
-
- If a discount is offered, the amount of the discount must also be determined.
- There are many purposes for discounting, such as to move out-of-date stock, to reward valuable customers, as a sales promotion, or to reward behaviors that benefit the discount issuer.
- Some common types of discounts include:
- Seasonal discount (for orders placed in a slack period for example).
- Trade discount (usually given when the buyer agrees to perform some function).
-
- Second degree - the price of the good or service varies according to quantity demanded.
- Age discounts: age discounts are a form of price discrimination where the price of a good or admission to an event is based on age.
- Occupational discounts: price discrimination is present when individuals receive certain discounts based on their occupation.
- An example is when active military members receive discounts.
- Retail incentives: this includes rebates, discount coupons, bulk and quantity pricing, seasonal discounts, and frequent buyer discounts.
-
- In merchandising accounting, purchases are the amount of goods a company buys in the course of a year, including the kind, quality, quantity, and cost.
- For an example of a purchase discount, a purchaser who buys a 100 dollar item with a purchase discount term 3/10, net 30 only needs to pay 97 dollars as long as he or she pays within 10 days.
- It also refers to information that should be recorded about the kind, quality, quantity, and cost of goods that are purchased and added to inventory.
- Purchases are offset by Purchase Discounts, and also Purchase Returns and Allowances.
- Under the net method, purchase discounts are realized right away.
-
- Second degree price discrimination: the price of a good or service varies according to the quantity demanded.
- Larger quantities are available at a lower price (higher discounts are given to consumers who buy a good in bulk quantities).
- Coupons attract sensitive consumers to the same product by offering a discount.
- Retail incentives: uses price discrimination to offer special discounts to consumers in order to increase revenue.
- Incentives include rebates, bulk pricing, seasonal discounts, and frequent buyer discounts.
-
- Trade allowances are incentives used to encourage a retailer to stock a product such as cash discounts or promotional incentives.
- Discounts are reductions to a basic price of goods or services.
- Discounts are sometimes given to customers who buy in large quantities.
- Kids eat free promotions offer a discount on the total dining bill by offering one free kid's meal with each regular meal purchased.
-
- Economic order quantity is the order quantity that minimizes total inventory holding costs and ordering costs: ${ Q }^{ * }=\left( \frac { 2DS }{ H } \right) ^{ \frac { 1 }{ 2 } }$.
- Economic order quantity is the order quantity that minimizes total inventory holding costs and ordering costs.
- The purchase price of the item is constant (i.e., no discount is available).
- Variables for the function are: Q = order quantity, Q*= optimal order quantity, D = annual demand quantity, S = fixed cost per order (not per unit, typically cost of ordering and shipping and handling.
- Purchase cost: This is the variable cost of goods: purchase unit price × annual demand quantity.
-
- The NPV Profile graphs the relationship between NPV and discount rates.
- The NPV calculation involves discounting all cash flows to the present based on an assumed discount rate.
- When the discount rate is large, there are larger differences between PV and FV (present and future value) for each cash flow than when the discount rate is small.
- The independent variable is the discount rate and the dependent is the NPV.
- It is the discount rate at which the NPV is equal to zero.
-
- Airlines use several different types of price discrimination, including: bulk discounts to tour operators, incentive discounts for higher sales volumes to corporate buyers, seasonal discounts, etc.
- Airlines must also prevent business travelers from directly buying discount tickets.
- Price varies according to demand: larger quantities are available at a lower unit price.
- An example is student discounts.
- Price discrimination is very common in services where resale is not possible; an example is student discounts at museums.