A note on optimal order quantities for credit purchases

In this note, optimal purchase quantities are derived for firms that regularly purchase items on credit. These derivations represent modifications to the traditional economic order quantity model and include situations where handling and storage costs are charged as incurred, prepaid, or billed after usage. Buying on credit introduces float ‘foregone’ as a relevant cost and makes discounting an integral element in the analysis. Wholesale and retail firms operating in development market-based economies are noted as example scenarios where the results from these derivations are managerially significant.