Business Mathematics & Statistics (MTH 302) : Mathematics of Merchandising 1 Objectives

Business Mathematics & Statistics (MTH 302)
MTH 302
LECTURE 14
MATHEMATICS OF MERCHANDISING
PART 2
1 OBJECTIVES
The objectives of the lecture are to learn about:
 Review Lecture 13
 Financial Mathematics Part 1
2 SERIES DISCOUNT
This refers to the giving of further discounts as incentives for more sales
3 TOTAL DISCOUNT
The series discount is as follows:
15% off first
Then… 10% off next
Then … 5% off next
Total discount not 30%
4 TRADE DISCOUNT-EXAMPLE
The price of office furniture is Rs. 20,000
The series discounts are:
20%,10%, 5%
What is the net price?

Trade Discount
Page 1 of 8
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N = L(1 – d)
N = (1-d1) (1-d2) (1-d2)
= 20,000(1-.2)(1-.10)(1-.05)
= 20,000(.8)(.9)(.95)
= 20,000(.6840)
= 13,680 Rs.
EXCEL Calculation
The calculation = 20,000(1-.2)(1-.10)(1-.05) was used to write the formula for the
discount. Then the discount was subtracted from the original price.
5 LIST PRICE
An order for power tools has a Rs. 2100 net price after a 30% trade discount.
What is the list price?
Page 2 of 8
Net Price
Net Price = L(1 – d)
L = N/(1 – d)
= 2100/(1 – .3)
= 2100 /(.7)
= 3000 Rs.
EXCEL Calculation
EXCEL formula for original price was based on the calculation = 2100/(1 – .3).
The net price was entered in cell B67.
% Trade discount was entered in B69.
The formula for Original price was entered in cell B71 as =B67/(1-B69/100).
The answer is shown in cell C72 as 3000.
6 TRADE DISCOUNT-EXAMPLE 2
Page 3 of 8
Find the single discount rate that is equivalent to the series
15%, 10% and 5%.
Net Price N = L(1 – d)
Trade Discount
Apply the multiple discounts to a list price of Rs. 100.
(1-d1)(1-d2)(1-d3)
15%, 10%, 5%
=100(0.85)(0.9)(0.95)
= 100(0.7268)
= 72.68%
% Discount = 100 - 72.68%

= 27.62%
EXCEL Calculation
EXCEL formula for original price was based on the calculation =100(0.85)(0.9)
(0.95).
The formula for net price was entered in cell F8.
The formula is shown in cell F8.
The answer is shown in cell F12.
Page 4 of 8
In the following slide, the net price was calaculated in cell F8. Then, the discount
was calculated assuming the original price was 100. This is a common method to
assume 100 as the price when no price is given but you are required to calculate
the net discount.
7 TRADE DISCOUNT-EXAMPLE 3
Page 5 of 8
The price of car parts is Rs. 20,000.
The series discounts are 20%, 8%, 2%.
What is the single equivalent discount rate?
Trade Discount
=100(0.8)(0.92)(0.98)
= 100(0.7213)
= 72.13%
% Discount = 100 - 72.13%
= 27.87%
Rs. Discount = (0.2787)(20000)
= 5,574 Rs.
EXCEL Calculation
EXCEL formula for net price was based on the calculation =100(0.8)(0.92)(0.98).
The formula for net price was entered in cell F21.

The formula is not shown.
Price of car parts was entered in cell F23.
Formula for discount was based on (0.2787)(20000) and is shown in cell F24.
The answer is shown in cell F26 as 5574.
Page 6 of 8
8 CASH DISCOUNT
A discount given for the prompt payment of an account is called Cash Discount.
No Cash Discount is allowed on Invoices, Returned Goods, Freight, Sales Tax and
Trade Discounts.
9 DISCOUNT PERIODS
Discount Periods are periods for the buyer to take advantage of Discount Terms.
10 CREDIT PERIODS
Credit Periods are periods for the buyers to pay invoices within specified times.
11 CASH DISCOUNT TERMS
Invoice was dated May 3. the Terms 2/10 mean that there is Discount 2% if invoice
is paid upto 10 May. Then discount can be claimed
12 CASH DISCOUNT-EXAMPLE
Page 7 of 8
What is the net payment for invoice value of Rs. 50,000 if paid upto 10 May?
Cash Discount
N = L(1 – d)
= 50,000(1-0.02)
= 50,000(0.98)
= 49,000 Rs.
EXCEL Calculation
EXCEL formula for net price was based on the calculation = 50,000(1-0.02).
however, here an IF condition was applied, that means that if the payment date in
cell D31 ($ sign is put in front of row and column to fix its location) is less than or
equal to 10 May then the discount will be as given in cell d30. here also $ sign was
used to fix the location of the cell.
In cell D38, the date was changed to 11 May and the same formula was applied
again. The result as shown in cell D39 and D40 as 0% (% discount) and 0(Rs.
Discount).
Page 8 of 8

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15% off first

Then… 10% off next

Then … 5% off next

Total discount not 30%

The series discounts are:

What is the net price?

N = (1-d1) (1-d2) (1-d2)

Net Price = L(1 – d)

The net price was entered in cell B67.

% Trade discount was entered in B69.

The answer is shown in cell C72 as 3000.

Find the single discount rate that is equivalent to the series

15%, 10% and 5%.

Net Price N = L(1 – d)

Apply the multiple discounts to a list price of Rs. 100.

% Discount = 100 - 72.68%

The formula for net price was entered in cell F8.

The formula is shown in cell F8.

The answer is shown in cell F12.

The price of car parts is Rs. 20,000.

The series discounts are 20%, 8%, 2%.

What is the single equivalent discount rate?

% Discount = 100 - 72.13%

Rs. Discount = (0.2787)(20000)

The formula for net price was entered in cell F21.

The answer is shown in cell F26 as 5574.

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