Quantity Break Buy-More Breakeven Calculator
A supplier offers a lower price if you order 8,000 instead of 2,000. The unit saving is obvious, but so is the extra inventory. This calculator adds up purchase, ordering and carrying cost both ways so you see the true annual difference.
Your numbers
Applies to all units in the order (all-units discount).
Buyer time, receiving, inspection and payment handling.
Capital, storage, insurance, shrinkage and obsolescence as a percent of unit value.
Your results
Assumes constant demand, an all-units discount and a single supplier. Check shelf life, storage capacity and obsolescence risk before buying ahead.
Annual saving vs carrying cost rate
Sweeps Annual carrying cost rate from 5 to 40, holding your other inputs fixed.
Price break analysis across your item master
Optional: we can run this comparison across all items with supplier price tiers in your ERP data.
Optional. The tool and every export work without this. No spam.
How to use it
Enter annual demand, the normal unit price, the discounted price and the minimum quantity for the break. Add the cost of placing one order and your annual carrying cost rate. The tool finds the economic order quantity at the normal price, then the cheapest order size that qualifies for the break, and compares total annual cost. The chart shows how the saving shrinks as your carrying rate rises, which is the key sensitivity.
The method
Total annual cost is purchase cost plus ordering cost plus carrying cost: D x P + (D / Q) x S + (Q / 2) x P x h. EOQ is the square root of 2DS divided by hP. With an all-units discount, you compare the EOQ cost at the full price against the cost at the larger of the break quantity and the EOQ at the discounted price. Because the cost curve is U-shaped, the best qualifying quantity is the break quantity whenever the discounted EOQ is below it.
- D = annual demand, S = order cost, h = carrying rate
- Discounted EOQ uses the lower price in the denominator
- Take the break only if the saving is positive
Reading the result
A small positive saving rarely justifies the risk of a bigger lot. Look for a saving of at least a few percent of total cost before changing policy, and check that the larger lot fits within shelf life and storage space. If the saving turns negative at a carrying rate you believe, the price break is a trap: the unit discount is smaller than the cost of holding the extra stock.
Common mistakes
The most common error is ignoring carrying cost or using only interest. Add storage, handling, insurance and obsolescence. Another is applying an all-units logic to an incremental discount, where only units above the break get the lower price. In SAP, Oracle, Epicor or Infor, the break is usually held as a scale price or price break table on the info record or supplier item; mirror those tiers here by running the calculator once per tier.
Frequently Asked Questions
What carrying cost rate should I use?
Most manufacturers land between 15 and 30 percent of unit value per year, built from cost of capital, storage, insurance, handling and obsolescence risk. Use your finance team's number if one exists, and test the range with the slider.
Is this valid for incremental discounts?
Not directly. With incremental breaks, only the units above the threshold get the lower price, so the blended price depends on order size. Model each lot size as its own blended price instead.
What if demand is lumpy?
EOQ models assume steady demand. For lumpy or project demand, use the result as a ceiling check and size lots from the real requirements plan.
Does it include price risk?
No. Buying ahead can also hedge against a coming increase, which is an extra benefit not captured here. Treat that as a separate judgment.
If you want order quantity recommendations recalculated from live demand and supplier price tiers in your ERP, Netray can build that as a read-only analysis.
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