Some friends of mine run a small business, in a small garage-like space, with a few employees, making and selling "plumbuses". The typical customer orders about 5 plumbuses at a time. When I heard that they have received inquiries for large orders of plumbuses (500, for bulk discount) and have consistently declined, I was confused. I strongly believe that they have the capacity to satisfy both small and large orders, in terms of production. Their reason for declining large orders was something along the lines of "...but each plumbus could be sold for more when we do the smaller orders". "Well, yes, but then you can make more plumbuses", is my response. Their thinking may apply to limited production items, whereas there are plenty of plumbus ingredients (dinglebops, schleem, etc) on the market where their small business will have no impact on the supply of the ingredients.
Surely there is an equation that they can use to satisfy their desired profits and fulfill these bulk orders. With my limited economics experience (some high school and college courses), I would imagine something like the following:
a(x) = price of producing, packing, shipping x plumbuses
b(x) = desired profit from selling x plumbuses at once
f(x) = a(x) + b(x)
...where the price of making x plumbuses falls on some curve, since making (and mostly packing/shipping) many at once is cheaper than processing one at a time, and the desired profit from an order of x plumbuses falls on another curve where each additional plumbus contributes some marginal profit.
I would like to express my ideas to my friends to help them succeed as a small business. The friend who is actually most opposed to fulfilling the bulk orders has a degree in Economics, so I would like to have some legitimacy in my pitch, backing up my position with real terms, equations, sources, and eventually, real numbers.
What are the terms and equations that I am thinking of but cannot put a name to, and what resources can be recommended so that I can more informed of this topic?