Business Mathematics || Module 2 || Week 5||Lesson 5: Exploring Trade Discount

TOPIC TITLE: Exploring Trade Discount

MODULE # 2

Module Learning Objectives:

At the end of this module, you should be able to:

1. determine the new cost of a product after giving trade discount/s;

2. compute for the equivalent single discount rate of a discount series; and
3. compare the savings form a single rate of discount rate and savings from a discount series.

LET'S GET STARTED!

When a manufacturer sells products to a retailing firm, the company usually

offers a discount on the purchase price, taking into account the time required
payment and other special considerations. These discounts are often made to
encourage prompt payment of bills.
In this lesson, you will study the mathematics involved in determining
payments of trade discounts. Do the following activities to prepare you for
this lesson. Write your answer with a complete solution of the following
conversion in a 1 whole sheet of yellow paper.

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 Business Mathematics || Module 2 || Week 5||Lesson 5: Exploring Trade Discount

Lesson 5. Buying and Selling

When a manufacturer sells an item to a retailer, the manufacturer usually provides a suggested list or retail
price. The list price of an item represents the price for which she really should sell the item. Now, if the retailer sells
using the price list, he will not get any profit at all. Therefore, when the manufacturer sells to a retailer, the manufacturer
gives the retailer a trade discount.
A trade discount is an amount by which a manufacturer reduces the retail price of a product that it sells to
a retailer, rather than to the end customer The retailer then charges the full retail price to its customers in order to earn a
profit based on the difference between the amount by which the manufacturer sold the product to him and the price at
which he then sells the product to the final customer.

Lesson 5.1 Single Trade Discount

Consider the following problem:

Example 1. Charles purchased eight pairs of denim jeans at a discount of 25%, which are listed for P 1,200 per piece.
How much does each denim jeans cost? How much will he save from buying eight pairs of jeans?

It is ordinary to see discounts on prices of goods or commodities so that business owners will increase their
sales by encouraging customers to purchase in large quantities. It is one way to attract more people and keep updated
with price changes after list of goods have been printed in a catalog. The price in the catalog in which the customer will
pay is called the list price. The price the retailer must pay after a trade discount is given is called the Net price
(Invoice price).
Trade discount problems are percentage-related problems. These are always based on the listed price of the
items being purchased. To find trade discount and Invoice Price, we use the formula,
Trade Discount = List Price x Discount rate (Td = Lp x Dr)
Net Price = List Price - Trade Discount ( Np = Lp - Td)

In the problem,
List price: P1,200
Rate of discount: 25%
Trade discount: unknown

Solution:

Step 1: Solve for the trade discount Step 2: solve for the Invoice Price
Trade Discount = List Price x Rate of Discount Net Price = List Price - Trade Discount
= (1,200) x (0.25) = 1,200 - 300
= ₱ 300 = ₱ 900

Thus, the total discount from buying 8 pairs of jeans is

(8 x 300) = ₱2,400.

Charles, therefore, saved ₱2,400 by the given discount

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 Business Mathematics || Module 2 || Week 5||Lesson 5: Exploring Trade Discount

Example 2. A manufacturer stated a list price of Php 15 000 less 30% trade discount for his client if he will agree to be
his “suki”. How much will the client save if he will agree on the manufacturer’s proposal?

Solution: Step 1: Solve for the trade discount Step 2: solve for the Invoice Price
Trade Discount = List Price x Rate of Discount Net Price = List Price - Trade Discount
= (15,000 x (0.30) = 15,000 – 4,500
= ₱ 4500 = ₱ 10,500

Lesson 5.2 Discount Series

Most appliance centers in malls offer more than one discount on their items.
In addition to the basic trade discount offered to all customers, the seller might also offer
small discounts for a large volume of purchase and for early orders for seasonal items.
Suppose two or more discounts are offered on the same product, how do
we solve its invoice price? Let us consider the problem below.

Example 3. An appliance store offers a refrigerator at ₱14,000 with a discount of 25% and 15%. How much does a
refrigerator cost?

To further attract buyers, two or more trade discounts are offered on the same item. A type of discount in
which several discounts are given to a customer at different times and different conditions is called discount series.
Discount series are given to encourage them to purchase products in volume. It is also effective in promoting seasonal
items and to entice a new set of customers.
Solution:

Step 1: Given are

List price of the refrigerator: ₱14,000
Discount rates: 25% , 15%
Invoice price of refrigerator: unknown

First is to apply the first discount rate to the listed price and subtract the discount obtained from the list price. So,
₱14,000 (0.25) = ₱3,500 First discount
14,000 - 3,500 = ₱10,500 First remainder

Step 2: Then apply the second discount rate on the first remainder to get the second discount. Subtract the second
discount from the first remainder to get the invoice price. So,

₱10,500 (0.15) = ₱1,575 Second discount

10,500 - 1,575 = ₱8,925 Invoice price

Therefore, the cost of the refrigerator given in the series of discounts 25% and 15% is ₱8,925. The trade discount in total
is ₱ 5075

Example 4. A subject brand is subjected to the series of discount of 15%, 10% and 5%. How much will be the net price
of the phone if the list price is ₱18,000?
Solution: Given are
List price of the cellphone: ₱18,000
Discount rates: 15% , 10%, 5%

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 Business Mathematics || Module 2 || Week 5||Lesson 5: Exploring Trade Discount

Invoice price of cellphone: unknown

In this we will try to use the formula on the left.

Np = Lp x (1-Dr1)(1-Dr2)….

Np = (18,000)(1- 0.15)(1- 0.10)(1- 0.05)

= ₱13,081.5

Thus, ₱13,081.5 is the new price of the phone. The trade discount all in all is ₱4,918.5

TOPIC TITLE: Mark Up and Mark Down

MODULE # 2
Module Learning Objectives:

At the end of this module, you should be able to:

1. differentiate markup and markdown;

2. solve problems related to markup and markdown; and
3. obtain the selling price after markup and markdown.

LET'S GET STARTED!

A business company tries to sell its products at a profit. This means that it must set its selling
price at a point high enough to ensure a net gain on sales. To determine the selling price, the business marks up the
price of the products.

When goods do not sell as rapidly as desired, the business may have to markdown some of its products in order
to sell them. They may also markdown the prices in order to reduce inventory or to attract customers. In this lesson, you
will study the various methods used to markup and markdown prices. To prepare you, answer the following discount
problems.

Lesson 6.1 Exploring Markup

Business engaged in merchandising generate profits through buying and selling activities. The amount of profits
earned depends on many factors, and one of it is the proper pricing of the goods or the items. Let’s study the following
examples

Example 1: A clothing line company purchases cotton for ₱60 per meter. Thirty percent of the cost goes to operating
expenses. The goal of the business is to earn 25% of the cost. How much should the company’s markup be the cotton?
How much should be the selling price of the cotton be?
Given: Cost per meter = ₱60

Operating expense= 30% of the cost

To cover the expenses or the overhead of running the business,

a markup (Mu) is put on products. The sum of the cost (C)
and the markup determines the selling price.
Selling Price= Cost + Markup or Sp = C + Mu

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 Business Mathematics || Module 2 || Week 5||Lesson 5: Exploring Trade Discount

Markup also defined as the sum of the Expenses (E) and the Cost (C).
Mark up = Expenses + Profits (Mu = E + P)

Given the formula above, we can solve the selling price as

Selling Price= Cost + Expenses + Markup or Sp = C + E + Mu

The company may sell the product by adding the cost and the markup.
By the given example, to compute for the selling price, we could use any of the two,

Sp = C + Mu Sp = C + E + Mu
OR
Sp = 60 + 33 = 93 Sp = 60 + (0.3 x 60) + (0.25 x 60)= 93

Example 2: Save More department store has bought transistor radios for sale. A radio
costs ₱420 and sells ₱560.50, while the overhead is 24% of the cost. Determine the following;
a. the markup
b. the operating expense (overhead)
c. the profit
Selling Price= Cost + Expenses + Markup or Sp = C + E + Mu
a. The mark is obtained as follows,
Mu = Sp – C
= 560.5 – 420
= 140.50, thus, the markup is ₱140.50

b. The overhead or the expense is obtained as follows,

E = 24% of the cost
= 0.24 x 420
= 100.8 Thus, the expense is ₱100.8
c. Profit can be obtained as follows,
Mu = E + P
P = Mu – E
= 140.50 - 100.8
= 39.70, Thus, the profit is ₱39.70
Now, suppose that you are asked to find for the markup rate, we can either base the rate of the markup on the
cost or the selling price.
If the markup is expressed as a percentage of the cost, or the selling price, we call it markup rate

When markup rate is based on cost (Mc), it When markup rate is based on selling price
is given by (Ms), it is given by

Mc %= x 100 Ms%= x 100

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 Business Mathematics || Module 2 || Week 5||Lesson 5: Exploring Trade Discount

Example 3. A new pair of shoes cost ₱5,500. The rate of markup based on the selling price is 15%. What is the selling
price and the markup?

Solution: Identify the given. Notice that cost and the markup rate are only given.
Cost = ₱5,500 Markup rate = 15% Selling price – unknown Markup-unknown
Since, M = 0.15(S), we get
S= C + M
S= 5,500 + 0.15(S)
0.85S= 5,500
S = ₱6,470.59, thus the selling price for the shoes would be ₱6,470.59.

To compute for the markup, go back with first formula’

M = 0.15(S)
= 0.15(6,470.59) = ₱970.59
or you could simply subtract cost from the selling price, you try!

Lesson 6.1 Exploring Markdown

There are times when a business owner reduces the price of the product to match the
competitor’s price adjustments. However, imposing a markdown may result in zero profit. To
compute for the highest rate of markdown, we solve for the following element first:

 The cost of one unit of commodity

 The price that will cover all the cost
 Expenses

1. A reduction in the regular selling price of a particular product that occurs in response to market conditions is called
a markdown.

2. The formula for the total cost is given by TC=C+E where TC is the total cost, C is the cost, and E is the expenses.
3. A breakeven happens when a business has zero profit for a particular product. The product's total cost is equal to its
price. It means that the business does not make any profit or suffer from any loss.

Since S = C +E + P and TC = C + E, then the selling price S become S = TC + P.

4. The profit or loss can be obtained by getting the difference between the selling price and total cost.

P=S-TC

Note that, when the value of P is negative, the selling price failed to cover the cost of buying the product, thus, the
business suffers from loss.

Let’s study the following examples.

Example 4. A sari-sari store sells a soft drink case at ₱360. The store's overhead expenses are 40% of the cost and
the owner wants a profit that is 25% of the cost.
a. How much is the cost of one case soft drink?
b. At what price must the store sell the case to cover all costs and expenses?

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 Business Mathematics || Module 2 || Week 5||Lesson 5: Exploring Trade Discount

c. Find the rate of discount that can be offered without acquiring an absolute loss (that is, failure to get back the
cost of the commodity),

Solution: Identify the given.

S = ₱360, E = 40% of Cost or 0.4C, P= 25% of Cost or 0.25C

a. Cost of one case b. Price that will cover all c. The Lowest price you can offer without loss.
S=C+E+P cost and expense If the selling price is ₱360, and one softdrink case
360 = C+0.4C + 0.25C TC= C + E is ₱218.18, then the maximum amount discount
360 = 1.65C = C + 0.4C you can offer is
360 = 1.65C = 1.4C 360 – 218.18 =141.82
C = = ₱218.18 = 1.4(218.18)
Discount rate = = = 0.1515 = 15.15%
= ₱305.46

TOPIC TITLE: Profit and Loss

MODULE # 2

Module Learning Objectives:

At the end of this module, you should be able to:

1. determine if profit or loss is achieved in a given transaction;

2. illustrate scenarios in which a businessmen experience loss; and
3. compute for breakeven point in a given revenue.

LET'S GET STARTED!

From the previous lesson, you have learned how a businessman compute the pricing of a product, and that is
through the markup or markdown. In this lesson, we will learn on how to determine if, on given a selling price, a business
gains profit or loss. As well, this lesson will help you to learn how to compute for a break-even point in which a business
does not gain profit nor loss. Curious? Buckle-up and let’s proceed.

Lesson 7: Profit and Loss

It is the ultimate goal of any man for his business to gain profit. Thus, it is necessary to learn the basic
calculation if a business do gain or loss for the sake of monitoring its stability.
Profit is earned if the new selling price, after applying markdown, is greater than the sum of the cost and
expenses. While loss is obtained when the net sale failed to match the cost of the goods purchased.

Let’s study the examples below.

Example 1. Rodrigo is engaged in a buy-and-sell business of perfumes. He bought 10 boxes of
perfumes. Each box costs ₱12,000 and contains a dozen of perfume bottles. He is planning to selll
one perfume bottle at ₱1,500. What is his expected profit on the ten boxes of perfumes?

Solution: The difference between the amounts of money earned from selling the ten boxes of perfumes and the cost of
those ten boxes gives the profit.

Given:
 10 boxes of perfumes containing a dozen bottles.
 120 perfumes bottles by Rodrigo
 Cost of each box = ₱12,000
 Selling price of each perfume = ₱1,500

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Business Mathematics||Module 2||Week 5||Lesson 5: Exploring Trade Discount

To solve the problem, we compute and first for the costs of 10 boxes. Given that each box cost ₱12,000
and he bought ten,
Cost = ₱12,000 x 10 = ₱120,000
Rodrigo can expect that the net sales he will get upon selling ten boxes consisting of 120 bottle is,
Net sales = ₱1,500 x 120 = ₱180,000
Thus, the gross profit he can expect would be,
Gross profit = net sales – cost of good sold
=180,000 – 120,000= ₱60,000

The difference between what a merchant invest into a business and what he receives in return is called profit. To
compute for profit, we use:
Gross profit = Net sales – Cost of good sales
Where Net sales is the amount of money he received from selling goods, and Cost is the amount he paid for the
goods.
However, there are cases in which the net sales are less than its cost; such difference is called loss. We express loss
mathematically as,
Loss = Cost – Net sales

Example 2. A watch store owner decided to offer 20% discount for a particular brand of watch which sells at
₱35,000. By doing so, his average sales increased from 5 watches to 12 watches a day. If he bought one watch
at a price of ₱22,000 from the supplier, by how much was the daily profit increased or decreased upon offering
such discount?

Solution: We compute for the daily profit before and after the discount was offered.
 Without the discount,
Gross profit per watch = ₱35,000 – ₱22,000.
= ₱13,000
Gross profit for selling 5 watches = ₱13,000 x 5 = ₱65,000

 With 20% discount,

New Selling Price = 35,000 x (0.2) 35,000 = ₱28,000
Gross profit per watch = 28,000 – 22,000 =₱6,000
Gross profit for 12 watches = 6,000(12)=₱72,000
Increase in daily profit = 72,000 - 65,000 = ₱7,000

Here are some factors why businessmen experiences loss:

Mismanagement
Unfavorable market condition
Change in trends for fashionable goods
Poor economic situation
Unsold perishable goods
Release of new/advance models for appliance or gadget
Example 3. Annie bought one dozen of smartphones for ₱200,000 with a discount of 5%. Half dozen were sold
at a price of ₱18,000 per unit. However, a new model for smartphone became available in the market, so she
sold the remaining half dozen at ₱12,000 each unit. What was her profit or loss?
Solution: First is to compute for the cost of the smartphones, with a discount of 5%.
Cost = 200,000 – (200,000 x 0.05) = ₱190,000
Then, solve for the net sales:
For six phone at a price of ₱18,000 = 6 x 18,000=₱108,000
For six phone at a price of ₱12,000= 6 x 12,000 =₱72,000

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Business Mathematics||Module 2||Week 5||Lesson 5: Exploring Trade Discount
Total Net sales = 108,000 + 72,000 = ₱180,000
Since the cost is greater than the total net sales, therefore Annie experience loss.

Loss = Cost – Net sales = 190,000-180,000 =₱10,000.

Hence, Annie loss ₱10,000 for her business buy-and-sell smartphones.

TOPIC TITLE: Personal Loans and Mortgages

MODULE # 2

Module Learning Objectives:

At the end of this module, you should be able to:

1. compute for the loan interest;

2. convert interest rate per year to its equivalent monthly rate and vice versa;
3. calculate interest using unpaid balance method; and
4. construct monthly installment payments for mortgage.

LET'S GET STARTED!

People borrow or loan for various reasons. Perhaps they need loans in order to pay unexpected
expenses such hospital bills, take advantage of midyear sale, purchase of new gadget, and buy a car or to
finance travels.
A business owner may borrow money to meet his or her future business plan of
expansion, pay his business expenses, or to have additional capital.

Thus, being knowledgeable on charging of interest for the borrowed or loaned

money is a must not only for the lender but for the borrower as well. For the lender
standpoint, it is to know the amount of income s/he may earn for lending or investing her
money. While for the borrower, it is to know the amount of interest s/he has to pay for
using the money.

Lesson 8: Loan and Interest

As mentioned earlier, interest is the percent of the amount of credit extended. In loans, it may be
treated as an expense of the borrower, and an income for the lender. Short term and long term credits are
offered by lending companies. Short-term credits are good for 1 day to one year, while long-term credits are
those longer than a year.
There are two types of interest that are used by the lender or creditors – Ordinary and exact interest,
when a loan is stated in a certain number of days.

 Ordinary interest is commonly used by the many businesses, uses 360 days.
 Exact Interest is used by the banks and other credit union, uses 365 days.

Let’s study the following examples.

Example 1. Francis want to know which credit company offers lower interest at the same interest rate of 9% if
he plans to borrow a quick loan cash of ₱50,000 for 90 days. If Bank A uses ordinary interest method to
compute for the interest and Bank B applies exact interest method, what bank will he choose? And what is the
difference of the interest offered by the banks?

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Business Mathematics||Module 2||Week 5||Lesson 5: Exploring Trade Discount
Bank A Bank B Thus, Francis should choose Bank B, as it offers less
interest than Bank A by 15 pesos.
Ordinary Interest: Exact Interest:
I=Prt I=Prt By the given example above, it is expected
I=50,000(0.09) () I=50,000(0.09) () for Francis to prepare ₱50,000 plus the interest as a

I=₱1,125 I=₱1,109.59
payment for his bank after ninety days. Note that
single payment interest which is the direct method of computing loan interest is applied.

However, that is rarely the case of borrowers. Most of us choose to repay the lending institutions by
installments. Hence, the computation for this payment method, which is called unpaid balance method is varied from
the above. Let’s see how these methods differ through the proceeding lessons.

Example 2. Converteach rate. Solution:

a. 15% per year to the equivalent monthly rate.
b. 1.5% per month to equivalent annual rate.
a. Divide annual rate to 12 to obtain
15% ÷ 12 = 1.25% monthly
b. Multiply monthly rate by 12 to get
1.5 x 12 = 18% annually

Example 3. Anica bought a perfume using a credit card at a price of ₱2,400 payable in four equal monthly
payments of 618.87 at 15% interest. Calculate the total interest on Anica’s purchase and construct an

Solution: Computing the equivalent monthly interest of 15% per year will be 15%/12 = 1.25% monthly.
First month: First month interest,
I= 2,400(0.0125) = 30
Subtract the first month interest from the monthly payment,
618.87 - 30 = 588.87 (total payment for the month)
To compute for the new balance after the first monthly payment, subtract the computed total payment to principal
from the previous balance,
2,400 - 588.87 = ₱1,811.13 =>will be your new balance
amortization table.
Second month: Second month interest,
I= 1,811.13 (0.0125) = 22.64
Subtract the second month interest from the monthly payment,
618.87 - 22.64 = 596.23, (total payment for the month)
To compute for the new balance after the first monthly payment, subtract the computed total payment to principal from
the previous balance,
1,811.13 - 596.23= ₱1,213.91 =>will be your new balance

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Business Mathematics||Module 2||Week 5||Lesson 5: Exploring Trade Discount

Nice work on your lesson so far! Now that you have already reviewed ratio and proportion, let’s now see how much
you’ve learned from your pace so far.

*Write Your answer in a separate sheet of paper

A. Write your answer on a 1 whole sheet of yellow paper. You may use the same paper for your answers on the
next activity below.
Congratulations on your job well-done pace for this topic of trade discounts. I’m am hoping that your learning
would help you in developing your skills and knowledge in terms of decision making in purchasing products that
are on sales. Now, let me check how much you have learned in your pace thru this activity.

Problem: Your parents are planning to buy you a laptop. To see what brand you will like, they brought you to
the stores for you to see it personally. Two stores offer the laptop you want; same brand, same specifications,
and the same price of ₱40,500.
Your father wants to buy in Store A because it offers a 40% discount. While your mother suggested that in
Store B you will pay lesser as it offers a 25%, 15%. And a 5% discount for the same laptop. How will you
explain to which store will you save the most? Justify your answer with supporting calculations. Write your
answer in a 1 whole sheet of paper. (20 pts)

B. Complete the table below.

VARIABLE COST SALE PRICE PER BREAKEVEN IN BREAK-EVEN IN
FIXED COST
PER UNIT UNIT POINTS SALES
1. ₱180,000 ₱35 ₱95
2. ₱150,000 ₱75 ₱125
3. ₱195,000 ₱24 ₱102
4. ₱3,995,000 ₱85 ₱320
5. ₱33,000 ₱33 ₱88

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Business Mathematics||Module 2||Week 5||Lesson 5: Exploring Trade Discount
C. Solve for the following problems.

6. Greg bought laptop for ₱28,000 and spent ₱2,500 for its spares. He later sold it for ₱25,000. How much is
his profit or loss?

7. Alden went to Bicol and bought 25 packs of pili nuts for ₱875 with 10% discount. When he got back in
manila, he sold 15 packs for ₱675, and the rest at ₱40 each. How much profit did Alden gain?

8. A mobile phone was sold for 12,000. Find the cost price of the mobile phone if the profit is 20%.

A. *Write Your answer in a sheet of paper

RATE OF RATE OF MARKUP/DOWN

MARKUP/DOWN
COST SELLING PRICE MARKUP/DOWN BASE ON SELLING PRICE
PRICE
BASE ON COST
1. 25 36
2. 48 35
3. 350 385
4. 280 255
5. 1,570 1,790
6. 12,960 10,540
B. Problem Solving!
Instruction: Solve for what is asked on the following problems. You may write your answers with a complete solution at
the back page for the activity above.

7. Petron sells oil at a markup of 40% of the selling price. If Petron has paid ₱22 per liter of oil,
a. what is the selling price per liter?
b. what is the rate of markup based on cost?

8. Calinisan merchandise buys bags at ₱400 and marks them up at 35% of the cost.
a. What is the selling price for the bag?
b. What is the markup rate based on the selling price?

9. A sports drink was offered for sale at ₱91.50 at the West Store. At the East Store, the regular price of a similar
drink was ₱114.50. What would be the markdown rate that East Store has to offer to match the price of the West
Store?

10. Jenny’s Restaurant offered a “buy one get one half off” sale for the midweek period. The “one half off”
referred to the lesser-priced dinner. A customer ordered steak for dinner, with a regular price of ₱849, and a
chicken dinner with a regular price of ₱619.
a. What was the overall markdown at which dinner was sold?
b. What was the overall rate of markdown at which the dinner was sold?

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Business Mathematics||Module 2||Week 5||Lesson 5: Exploring Trade Discount

References
Books:
Armas, M. F. (2017). ConceptualMathandBeyond.Quezon: Brilliant Creation.
Lopez, B. R., Lundag, L. M., & Dagal, K. A. (2019). BusinessMathematics.Quezon: Vibal Group, Inc.

Online Resources:
Grayson.Edu. (2020, July 06). Retrieved from Students Academic Resources:
https://www.grayson.edu/currentstudents/Academic%20Resources/student-labs/math-hub-
pdfs/Fraction%20Review.pdf Media, C. (2020, July 07). GenMath. Retrieved from Gen Math:
http://getmath.ca/courses/percentage/calculating-base

Timeline!

Let’s be mindful of your deadline.

Activity Name of Activity Date of submission Remarks

Number
1 Application

2 Assessment

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