In volume pricing, how is the cost calculated?

In volume pricing, the cost is calculated by multiplying the entire quantity of items purchased by the cost of the tier that corresponds to that quantity. This method incentivizes larger purchases by reducing the price per unit as the number of units increases, based on defined pricing tiers.

For instance, if a product has a tiered pricing structure that provides a discount for larger quantities, the pricing at each tier applies to the total volume. So, if a customer buys 100 units and the tier price for that quantity is significantly lower than for smaller amounts, the whole purchase is billed at this lower tier rate, resulting in a substantial discount relative to smaller quantities.

Using this structure helps businesses effectively manage large orders and can encourage customers to purchase more to benefit from the lower pricing, which is how volume pricing is designed to function efficiently.