Order Quantity Price Break Total Cost Calculator
Suppliers offer lower prices for larger orders, and the question is always whether the saving beats the cost of holding more stock. This calculator compares total annual cost at the standard price and at the break.
Your numbers
Buyer time, receiving, inspection and invoice processing.
Capital, storage, handling, insurance and obsolescence risk.
Your results
Uses the classic EOQ cost model with a single price break. It ignores storage limits, shelf life, cash constraints and price changes, so check those before committing.
Total annual cost vs annual demand
Sweeps Annual demand from 1000 to 50000, holding your other inputs fixed.
Price break review across your parts
Optional: a short review of running this comparison at scale on your ERP purchase history.
Optional. The tool and every export work without this. No spam.
How to use the calculator
Enter annual demand, your cost to place an order and your annual carrying cost as a percent of price. Then enter the standard price, the quantity needed to earn the discount and the discounted price. The tool computes the best order quantity under each price, adds purchase, ordering and carrying cost for each, and shows the annual saving from taking the break.
The method
Total annual cost equals purchase cost plus ordering cost plus carrying cost: D times P, plus D over Q times S, plus Q over two times i times P. At the standard price the best quantity is the EOQ if it falls below the break, otherwise it is capped just under the break. At the discount price the best quantity is the EOQ or the break quantity, whichever is larger, since you must order at least the break to earn the price.
- D annual demand, S cost per order
- i annual carrying cost rate, P unit price
- Q order quantity
Reading the result
A positive saving means the discount covers the extra carrying cost, and you should order at the break. A negative saving means the extra stock costs more than the price cut saves. Look at the chart: the discount usually wins at high demand and loses at low demand, so the decision can change as volume changes. Re-run the calculation when forecasts or prices change.
Common mistakes
Setting the carrying rate too low is the most common error, which makes every discount look attractive. Include obsolescence and storage cost. Another is ignoring the shelf life or engineering change risk of the part: a discount on a part likely to be redesigned is no saving at all. Also, check whether the supplier will allow blanket releases to earn the break without taking all stock at once.
Frequently Asked Questions
What carrying cost rate should I use?
Many manufacturers use a range of roughly 15 to 30 percent of unit value per year, built from capital cost, storage, handling, insurance, shrinkage and obsolescence. Calculate your own with finance rather than borrowing a generic figure.
Does this handle multiple price breaks?
This version compares one break against the standard price. For several breaks, run it for each break against the next lower one and choose the lowest total cost. The method is the same.
What if the break is a blanket order commitment?
Then you may earn the lower price without holding all stock, because releases are spread over time. Carrying cost falls, so the discount is even more attractive. Use the blanket release worksheet to plan it.
Why does the saving change with demand?
At higher demand you reach the break quantity faster and order more often anyway, so the extra stock held to earn the price is small. At low demand the same break means holding a long supply, and carrying cost eats the saving.
If you buy thousands of parts with price breaks, we can run this comparison across your whole purchase history. Ask for a review.
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