Economic Order Quantities, Volume Discounts, and Wealth Maximization |
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Authors: | Richard A Followill Michael Schellenger Patrick H Marchand |
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Institution: | Appalachian State University, Boone, NC 28608.;University of Wisconsin-Oshkosh, Oshkosh, WI 54901.;Appalachian State University, Boone, NC 28608. |
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Abstract: | This study challenges the generally accepted managerial decision to accept a quantity discount if total, perperiod inventory and acquisition costs are reduced. In this paper, the economic order quantity model is reformulated within an explicit wealth maximization framework, and the reformulated model is then utilized to analyze inventory decisions when volume discounts are available. The results of the study indicate that the traditional method of analyszing volume discount opportunities may invoke wealth decreasing decisions. |
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