Optimal Purchase Volume Calculator is an MS Excel financial model used for comparing up to five purchase options of inventory with different purchasing conditions (such as the volume of a purchase, transportation costs and customs duties). Furthermore, the model also takes into account the cost of money “frozen” in the inventory based on the company’s required cost of capital and average monthly sales. The option with the final lowest price per unit of inventory in a purchase is presumed to be the most profitable option.
The model makes it possible to take into account the following purchasing conditions:
- the number of items in one purchase;
- the price of one item in each of the purchase options (likely to depend on the volume of the purchase);
- total transportation expenses in each purchase option;
- the cost of customs duties in each purchase option (if applicable);
- the number of days by which suppliers allow the payment for goods to be postponed;
- the number of units currently in stock (required for calculation of the;
- the average monthly sales in units;
- the required cost of capital of the company (WACC).