Specific Quantity Discount Analysis Example Home Page Back to NoteBook Summary Download Demo |
Sourcing Decision Support,
Inc. Specific Quantity Discount Analysis...Are
discounts for larger quantities real or illusionary? What is the maximum
quantity you should buy in each price break?
In specific quantities pricing there is a price for each quantity on the price list or quotation (1 unit for $10.00, 2 units for $9.50 each, etc). Quantity Discount Analysis (QDA) calculates the incremental price difference for each quantity and price. This process shows the real price that is being charged for the next quantity rather than average price for the entire quantity. This analysis either confirms that you are in fact getting an increasing lower price as the unit volume increases or that the incremental unit price is increasing and decreasing as volume increases (irrational behavior). What you would like to see are two lines starting from the same point with a gap between increasing as volume increases. Perform a QDA analysis on all pricing to determine if the if price schedule you are analyzing is rational (the discount is consistent with larger volumes) or irrational (the discount is not consistent with larger volumes) before performing other SDS analyses. |