An improved procedure for economic order quantity with all - unit price discounts

Abstract

Suppliers often offer price discounts for large purchases. These discounts are generally of two types: all-unit discounts and incremental discounts. In an all-unit discounting scheme the discounts are offered to every unit purchased whereas in the incremental discounting scheme discounts are offered only to the additional units ordered beyond a specified quantity. Hadley and Whitin[1] provide a procedure for computing the economic order quantity (EOQ) with a discounting pricing scheme. Sethi[2] has considered the possibility of disposals of excess purchases at some finite cost in order to take advantage of discounts. Das[3] has considered the case when units are charged more for larger quantity orders. This article deals with all unit discounting and introduces an improved procedure for determining the optimal lot size.