CPIM Practice Exam

What is a quantity discount?

1. A charge for expedited shipping

2. An allowance for shipping delays

3. A price reduction based on purchase quantity

4. A fixed fee per transaction

The correct answer is: A price reduction based on purchase quantity

A quantity discount is a price reduction offered to buyers based on the amount of product they purchase. This practice is commonly used by suppliers to incentivize larger orders, encouraging customers to buy more than they might originally intend. By offering a discount for buying in bulk, suppliers can increase their sales volume while providing customers with a cost-saving opportunity. This method not only helps in managing inventory levels by encouraging larger purchases but also enhances customer loyalty, as clients may prefer to consolidate their orders with suppliers that offer these price advantages. The discount is typically structured in tiers, where the more the customer buys, the greater the discount they receive per unit. The other choices do not describe quantity discounts accurately; expedited shipping involves additional charges to transport goods faster, allowances for shipping delays pertain to adjustments made for late deliveries, and a fixed fee per transaction is unrelated to the volume of goods purchased. Thus, recognizing the nature of quantity discounts is crucial for understanding pricing strategies in supply chain and inventory management.