How to use the tiered pricing calculator
- Enter the quantity you want to price.
- Choose how the tiers apply: each tier on its units (graduated) or reached tier on all (volume).
- List the tiers. Each one runs up to a quantity and has a price per unit. Leave the last tier's limit blank for no limit.
- Read the total, the average price per unit and the cost of each tier.
Formula
Graduated: total = the sum over tiers of (units in the tier x that tier's price)
Volume: total = quantity x the price of the tier the quantity reaches
Average price = total / quantity
A tier covers the quantities after the previous tier's limit up to its own limit.
200 units across three price tiers
The tiers are up to 100 units at $2.00, up to 500 at $1.50 and above that $1.00. With graduated pricing, 200 units cost 100 x $2.00 + 100 x $1.50 = $350.00, an average of $1.75 a unit. With volume pricing the 200 units reach the $1.50 tier, so all of them cost $300.00.
At 600 units, graduated pricing is $200 + $600 + $100 = $900.00, while volume pricing charges 600 x $1.00 = $600.00. The prices are examples. Enter the ones from your own price list.
Graduated versus volume
In graduated pricing, you pay each tier's price only for the units inside that tier, like income tax brackets. In volume pricing, reaching a tier lowers the price for every unit, which can make a total fall when you add a unit near a threshold.
Suppliers and software plans use both, and the same words sometimes mean different things. Check which one your price list describes before relying on a number.
Where it is useful
You can use it to price orders for customers, check a supplier's quote or compare plans. Setting the tiers is a business decision, and this tool only does the arithmetic on the prices you give it.
To work from cost to a selling price use the markup calculator or the cost plus pricing calculator. To see the effect of a discount on margin try the profit margin calculator.
Assumptions and limits
- Quantities are whole units.
- Tiers are listed from the lowest quantity to the highest, and the last tier can have no upper limit.
- Prices are per unit and stay the same inside a tier.
- Taxes, shipping, minimum order charges and extra discounts are not included.
Frequently asked questions
What is the difference between graduated and volume pricing?
Graduated pricing charges each tier's price on the units inside that tier. Volume pricing charges the price of the tier you reach on every unit.
How do you calculate tiered pricing?
For graduated pricing, multiply the units in each tier by that tier's price and add the results. For volume pricing, find the tier for your quantity and multiply the whole quantity by its price.
Why can the last tier have a blank limit?
A blank limit means the tier applies to every unit above the previous limit. Only the last tier can be blank.
Can a higher quantity cost less in total?
With volume pricing it can, just above a threshold, because the lower price applies to all units. Graduated pricing never lowers the total as the quantity rises.