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?
Besides the math to determine per unit cost, you might also need to consider the opportunity cost of having so many.
- How long will the bulk supply last?
- Is it something you will get tired of having?
- How much space does it occupy?
- Is it perishable?
- Will it expire?
…
Is it perishable? Will it expire?
used to work at Sam’s Club in highschool (yeah. it was awful then. I suspect it’s more-awful now). What people don’t want to know? those big ginormous tubs of mayo? they go bad rather quickly. Not like, rancid bad, but they’re definitely not as fresh or as worthwhile.
Also the rotisserie chickens, bakery and meat are loss leaders to get you in the door. everything else they’re making huge profits on. Especially everything that’s at the front of the store- the bulk candy, the electronics, the seasonal things. those god awful t-shirts and disgustingly cheap tube tops.
never by mayo in bulk. Also never buy the nacho cheese. Nobody needs a gallon-can of nacho-flavored valve sealant. just. trust me on that.
What if I want to repair my roof, while at the same time feeling like my seats are too close to the concession stand at Fenway Park
Look, you don’t have to trust me, that’s between you and your gastroenterologist
Bulk mayo makes sense if you’re a restaurant or cafeteria or running a summer camp or something like that. Probably not for many other people.
Nacho cheese doubles as a personal lubricant.
What other flavors valve sealant you got I’m a man of discriminating tastes
They had serveral versions of tire sealant in the automotive section.
They also had frozen “creamy potato soup” that contained no potatoes and didn’t need to be refrigerated.
It’s been a while though.
So is that soup good on my valves or what we got a race this weekend and I’m not falling behind Jimmy three valves again
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- Will you really use that many?
I used to buy engine oil and filters in bulk, then car needed to be totaled. Difficult selling oil as a private.
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“That is correct, but also take into account that defect and return rates may behave differently when buying in bulk. Here’s an explanation…”
You can insert the same point in a constructive way without shitting on someone for answering correctly and helpfully.
I am not a “Math Nerd©” but even I know that what the item is doesn’t matter to answer this question. The question is about how to compare what the savings are per item bulk vs individual. It could be cars or bananas, what the item is is not important to the question. The question is asking for formula by example, not for someone to do their example math problem and return an itemized price sheet.
Returns and defects can effect savings per item, but the question does not include a clause that requires this calculation. Since the question does not mention it, it can be assumed OP was asking about savings before any defects or returns are made. This is not a net savings question, it is a gross savings question. Gross savings of course being the savings before any modifiers such as sales or import taxes (which are also not mentioned and therefore rightfully ignored by the person you attempted to “correct”), or in this case, defects and returns.
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Division.
Divide $20 by 200 gives you $20/200 = $0.1 = 10¢
Dividing $60/750 gives you $0.08 = 8¢
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Irrelevant. If we’re comparing identical items, the expected defect rate should be roughly the same.
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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
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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.
I mean the rate of defective products should be the same for both.
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The link isn’t working.
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Shuttup Meg
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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.
As others mentioned, it’s simple division. But to properly compare, you have to take into consideration the “units” in which you’re dividing.
E.g. if you’re buying crayons, you can compare the # of crayons to the price. But if you’re buying chicken breasts, you can’t really compare the # of chicken breasts, but rather the ounces (or, whatever measurement of weight).
Total Cost of batch / quantity of items = cost per individual item. 20 dollars /200 items =10 cents per item 60$/750item= 8 cents per item. It will be helpful for you to let this equation roll in your brain for a bit and try to understand why it is true maybe.
Geometrically the same exact idea can be visualized. you can think of total cost $ being the length of a line segment, and the quantity of items as equally split portions of that line seg. If you have a total cost of 1$ (a line seg with length of 1) and get two items, the cost of each item is 50c, or the line will be partitioned equally in two exactly In half. If you had three items the line would be split into thirds and so on.
For cost per unit, you divide the cost by the number of units. $20/(200 units) = $0.10 per unit. $60/750= $0.08, so 2 cents cheaper per unit.
But if you actually only need 50 but can’t resist a “good deal”:
The 200 cost $0.40 per item that you actually need, the 750 cost $1.20 per item that you actually need (plus the cost of storing and at some point throwing out the ones you don’t need).
Division.
200/20=10 per $
750/60=12.5 per $
200 for $20 is $0.10 each (200 for 2000 pennies) while 750 for $60 is $0.08 each (750 for 6000 pennies) so you save 2 cents per item. Or you got 150 items for free by buying the 750 pack.
150 free items is the key part here. That’s all you need to know.
I look at it like a discount. It’s 20% off. My wife can get mad when I buy things cause they’re on sale from Sam’s club. Not perishable stuff, but like soap or deodorants or canned goods. If something is on sale for $8 that’s normally $10, I’m getting a 20% discount on it. Or it’s like an investment. You’d be crazy not to invest money in something that was guaranteed a 20% return in less than a year.
cost per unit
This right here answers your own question. The word “per” implies division in math. Cost per unit = cost divided by units. If cost is $20, and units is 200, that means you have $20 / 200 = $0.10.
Similarly, 150 miles per 2 hours is 150 miles / 2 hours = 75 miles / 1 hour = 75 miles per hour
Other math vocabulary hints: and means addition (3 and 5 is 8) and of means multiplication, typically with a fraction (half of 6 = 1/2 * 6 = .5 * 6 if you prefer = 3
