How can I compare the money saved when buying an item in bulk?
How can I compare the money saved when buying an item in bulk?
Lets say I can buy 200 of something for $20. but for $60, I can buy 750 of them. How can I quantify the money saved as cost per unit?
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Division.
Divide $20 by 200 gives you $20/200 = $0.1 = 10¢
Dividing $60/750 gives you $0.08 = 8¢
this is basically the start point and at relatively close scales will work pretty well.
this can also be expressed as a 2 in 10 (20%) bulk discount.
you can add on adjustments if you can estimate other factors like the admin cost (of your time) per transaction, a defect rate cost or spoilage, cost of storage and transportation and so on.
These overheads can sometimes be shared across other products, especially transport and storage.for longer term stuff you might want to translate this into an equivalent annual (or longer ) cost per year/day of consumption that covers expected consumption with your safety margin.
if you need to account for every element of you cost base to the nearest penny then it can get pretty complicated - but if you're prepared to make simplifying assumptions like:
"It doesn't spoil over time",
"I already have some unused space",
"i don't need insurance on storage.",
"i'm going to ignore any adjustments lower than 0.001 cents per unit (a materiality threshold)"Whether those assumptions are a good idea or not, depends upon the wider context.
You must be living in a perfect world to use math to answer this question. You're assuming defective products don't exist...
Irrelevant. If we're comparing identical items, the expected defect rate should be roughly the same.
Except buying objects in low quantities allow defects to be detected much sooner, letting you exchange/return/work a deal with the seller. If you buy stuff in bulk and realise the fourth sack of flour has mold, you're likely to already have passed the reasonable threshold for exchange or return.
Okay. Well is the item a food product or a tech product?
Is it insured? What's the cost to ship it back and get an exchange or refund if it's a defective unit? Who pays to ship it back if so? How much does it cost to keep in storage until it sells?
There are way more questions that need answers to even halfway try answering OP. Bananas need refrigeration, fidget spinners need little more than a box.
OP didn't say what they were looking to order in bulk, but doing simple arithmetic without sufficient information means basocally squat.
What's the item in question? Is it apples (the actual fruit) or Nvidia graphics cards?
They're not gonna have the same failure rate. To assume everything has the same failure rate is a failure in data analysis.
You misunderstand. Assuming you're buying 200 of product A or 750 of product A, you should expect the same proportion to be defective. Nobody's suggesting two entirely separate products should have the same failure rate, but the question is also not about comparing two entirely separate products
Point is, there's a missing factor here. How much does storage price cost?
No way to know if OP can't tell us whether it needs constant refrigeration or not. That drastically changes the prices yo.
You totally missed my point. OP didn't even distinguish whether they're looking to purchase produce (which has a short shelf life), or looking to purchase electronics or mechanical devices (which tend to have a fairly long shelf life).
It costs either way to keep items on the shelf. But, like, what's it cost to keep the items on the shelf long enough to sell them without half your stock rotting away?
I mean the rate of defective products should be the same for both.
You're assuming every product has the same failure rate, which is absolutely not true. Read my other comment...
The link isn't working.
Link is working fine for me, I'm using Jerboa on Android.
Shuttup Meg
Yes, Meg is a defective product as well, yet somehow she still makes money. Maybe they should have got a refund...