The quantity discount model evaluates whether using an order size that qualifies for a price discount is always less cost effective than using the economic order quantity.

Question

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The quantity discount model compares the total cost of purchasing a certain quantity that qualifies for a discount versus the total cost of purchasing the economic order quantity. It is possible that purchasing a larger quantity to qualify for a discount may be more cost effective than purchasing the economic order quantity, depending on the discount rate and the cost of holding inventory.

The Quantity Discount Model Evaluates Whether Using an Order Size