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Check whether the new price applies to every unit
A tier can apply a lower price to the entire order, or only to units above a threshold. Those terms produce different calculations. Establish the actual price rule, quantity and included costs before negotiating an apparently attractive larger order.
Business Victoria’s pricing guidance tells readers to calculate discount effects rather than assuming more volume means more profit. Its benchmark and price-tolerance suggestions are not inputs to this example.
Three hundred units can leave less than two hundred
Fictional one-order comparison, all amounts in U.S. dollars: the original expectation is 200 units at US$120 each. Included variable delivery cost is US$70 per unit. A proposed larger order contains 300 units, but every unit is priced at US$100. Fixed costs are unchanged in this comparison.
| Order | Sales | Included variable costs | Contribution |
|---|---|---|---|
| 200 × US$120 | US$24,000 | US$14,000 | US$10,000 |
| 300 × US$100 | US$30,000 | US$21,000 | US$9,000 |
The extra 100 units do not recover the whole price cut
At the new price, the extra 100 units contribute US$3,000: 100 times (US$100 minus US$70). But the 200 units already expected lose US$4,000 of contribution through the US$20 price cut. The net change is minus US$1,000.
To match the original US$10,000 at US$30 contribution per unit requires more than 333 units, so at least 334 whole units under these exact assumptions. That is a calculation to test, not proof the buyer will order 334 units.
Price the actual extra work too
Ask management whether the larger order changes freight, overtime, quality checks, stock, sales commission or management cover. An unchanged variable cost is an assumption to verify. If the larger order requires another fixed commitment, include it separately.
Also compare payment dates and working capital. US$30,000 of sales is not automatically US$30,000 in the bank before production. Put supported annual totals into U.S. unit economics and the actual purchase/receipt schedule into the wider cash plan; keep the order-level discount table alongside both.
Scope
- All amounts and order terms are fictional. No normal discount, buyer demand, complete net profit or enforceable resale-pricing policy is established.
Next step
Record the exact discount tier, compare total contribution with the baseline and cost the extra delivery and cash commitments before approving the larger order.
Sources & review notes
Government of Victoria — Business Victoria
Passage, dates and research notes
official-guidance · Understand how discounting works; understand margin and markup
Use only the need to calculate discount effects. Do not adopt benchmark margins, storage-cost percentages or claimed price-increase tolerance.
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