Purchase Costs
The purchase cost of an item is the unit purchase price from an external source including transportation and freight costs. For construction materials, it is common to receive discounts for bulk purchases, so the unit purchase cost declines as quantity increases. These reductions may reflect manufacturers' marketing policies, economies of scale in the material production, or scale economies in transportation. There are also advantages in having homogeneous materials. For example, a bulk order to insure the same color or size of items such as bricks may be desirable. Accordingly, it is usually desirable to make a limited number of large purchases for materials. In some cases, organizations may consolidate small orders from a number of different projects to capture such bulk discounts; this is a basic saving to be derived from a central purchasing office.