Finance Tools
Bulk Purchase Discount vs Holding Cost Calculator
Compare bulk purchase discounts against inventory holding costs to estimate net savings and the break-even holding period.
Compare bulk purchase discounts against inventory holding costs to estimate net savings and break-even holding time.
Price without bulk discount.
Percent discount offered for bulk buying.
Bulk unit price: $4.60 (unit discount: $0.40)
How many units you buy in the bulk order.
Average monthly consumption of this input.
Estimated months of supply: 4
Includes cost of capital, storage, insurance, shrinkage, and write-down risk.
Average inventory value (approx): $184,000
Discount savings
Gross discount savings: $32,000
Holding cost
Estimated holding cost: -$11,040
Net outcome
Net savings: +$20,960
Positive means bulk discount outweighs holding cost (under these assumptions).
Break-even holding months
Break-even months: 11.59
If you expect to hold inventory longer than this, the carrying cost may erase the discount benefit.
Tip: If spoilage/obsolescence is meaningful, increase the carrying rate to reflect write-down risk.
How it works
- Gross discount savings = (regular price − bulk price) × bulk units.
- Months of supply = bulk units ÷ monthly usage.
- Average inventory (approx) ≈ bulk units ÷ 2.
- Holding cost ≈ avg inventory value × carrying rate × (months/12).
- Net savings = discount savings − holding cost.
FAQ
Why use average inventory (bulk/2)?
If you consume inventory steadily, inventory declines linearly, so average on-hand is about half of starting inventory.
What if usage is seasonal?
This tool assumes steady usage. For seasonal usage, treat monthly usage as your weighted average or test scenarios.
How to use this bulk purchase discount vs holding cost calculator
- Enter regular unit price and bulk discount (% or discounted unit price).
- Enter bulk purchase quantity and your average usage per month.
- Enter annual carrying cost rate (cost of capital + storage/insurance).
- Review gross discount savings, holding cost, and net savings.
- See the break-even holding months where discount equals carrying cost.
Example
Regular price is $5.00/unit. Bulk discount is 8%. You buy 80,000 units and use 20,000/month. Annual carrying cost is 18%.
- Discounted price = 5.00 × (1 − 0.08) = 4.60
- Gross discount savings = (5.00 − 4.60) × 80,000 = 32,000
- Extra inventory held (avg) depends on usage; calculator estimates holding months
- Net savings = discount savings − holding cost
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