Volume Discount Pricing Calculator

How it works

A volume discount lowers the unit price as the quantity ordered rises. The price list is a set of tiers: each starts at a breakpoint quantity and carries a discount off the base price, so the tier price is the base price times one minus the discount.

With all-units pricing, the whole order is priced at the tier the quantity reaches: 1,500 units at a 1,000-unit breakpoint all get the 1,000-unit price. With incremental pricing, only the units that fall inside each tier get that tier's price, so the first 999 units are still charged at the base price and the discount builds up gradually.

Under all-units pricing an order just below a breakpoint can cost more than one at the breakpoint. The table shows the order total and average price at the start of each tier, so the jump is visible. The margin column shows how much of each tier price is left after the unit cost.

Formula

tier price  = base price × (1 − tier discount)
all-units   : order total = quantity × price of the tier reached
incremental : order total = Σ (units falling in each tier × that tier's price)
margin      = (price − unit cost) ÷ price
saving      = base price × quantity − order total

Example

A $5.00 item with a 4% discount from 1,000 units and 5% from 2,000 units has tier prices of $5.00, $4.80 and $4.75. With all-units pricing, an order of 1,500 is priced entirely at $4.80: $7,200.00, a saving of $300.00. With a $3.00 unit cost the margin is 37.50%.

With incremental pricing the same order is 999 × $5.00 + 501 × $4.80 = $7,399.80, an average of $4.9332 per unit, saving $100.20, and the margin is 39.19%.

Assumptions and limitations

• Tier discounts are percentages off the base unit price, not off the previous tier.
• Prices are not rounded to the cent before multiplying; a price list that rounds each tier price can differ by a fraction of a cent per unit.
• The margin uses a constant unit cost. Larger orders can change your own cost (freight, material breaks), which the calculator does not model.
• Shipping, taxes and payment fees are not included.
• Results are for informational and educational purposes and are not financial or accounting advice.

Frequently asked questions