Quantity Discounts from Supplier

Quantity discounts are very common for goods of all types, whether retail, wholesale, or industrial. Although there are many different types of quality discount procedures employed, there are two that are the most important: all-units and incremental. In both cases there are one or more quantity break-points, defining changes in the unit cost. The all-units case simply applies the discount effective in an interval to all units of the order; the incremental method applies the discount only to the units past the breakpoint. In either case, we wish to minimize an average cost function which is smooth on an individual interval but changes for the next interval. Thus, we may simply minimize costs on each interval, and choose the minimum of these. In turn, on each segment, the minimum occurs.

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