Existence of Quantity Discounts

Recurrently, the firm is capable to take benefits of quantity discounts.  Since these discounts affect the price per unit, they influence also the Economic Order Quantity thereof. If a discount exists, then frequently the minimum amount at that discount is provided may be greater than the Economic Order Quantity. The total holding cost will increase since the average inventory held increases whereas the total ordering costs will reduce since the number of orders reduce if the minimum discount quantity is ordered. The total however purchases cost will decrease.