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BUYING

BUYING

Lesson 1 Trade Discounts

Lesson 2 Discount Series

Lesson 3 Retail Discount

Prepared by: Frederick M. Manuel, PhD

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Lesson 1

 Trade Discounts

Manufacturers and wholesalers wanting to encourage customers to

purchase goods in large quantities frequently offer trade discount and grant
deductions large enough to enable their customers to generate a satisfactory
net profit. This deduction or trade discount is printed in a catalogue or price
sheet. The list price or catalogue price per merchandize being sold to various
buyers contain prices that retailers should charge their customers.

The price offer when the trade discount has been subtracted from the
list price is called the invoice price or the net price. To compute the trade
discount or discount and the net price, the following formulas should be used:

1. Amount of discount = trade discount rate x list price or discount =

discount rate x list price

2. Net price = list price - discount

Other formulas:

amount of discount
3. Discount rate = list price

net price
4. List price = 100% − discount rate

Example 1:

Compute the net price and the discount for a P25,000 stereo set
offered at a 25% discount rate.

Solution:

Discount = discount rate x list price

= 25% x P25,000

= .25 x 25,000

Discount = P6,250

Prepared by: Frederick M. Manuel, PhD

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Net Price = list price – discount

= 25,000 – 6,250

Net Price = P18,750

The discount is P6,250 and the net price for the stereo set is P18,750.

Example 2:

A sala set had a list price of P35,000 and was sold to a customer for
P29,750. What was the trade discount rate?

Solution:

Amount of discount = list price – net price

= 35,000 – 29,750

= 5,250

amount of discount
Discount rate = list price

5,250
= 35,000

= .15 or 15%

Example 3:

Rex paid P10,200 for a refrigerator on sale that had 20% of the list price. What
was the list price of the refrigerator?

Solution:

net price
List price = 100% − discount rate

10,200
= 100% − 20%

10,200
= 80%

10,200
= .8

= P12,750

Prepared by: Frederick M. Manuel, PhD

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Thus, the list price of the refrigerator is P12,750

 LEARNING ACTIVITY Solve the missing items in

each of the following:

Net Price Discount Rate List Price Amount of

Discount

1. ___________ _____________ P4,450 P546

2. P29,025.75 _____________ P34,350 _____________

3. P17,281.25 1
122 % _____________ _____________

4. ___________ 2
163 % P36,000 _____________

5. ___________ _____________ P8,750 P1,720

Solve the following:

1. A shirt was originally sold for P350 and is reduced to P150 clearance. Find
the percent of the reduction.

2. An oven toaster which normally sells for P750, was purchased by a

consumer for P520. What percent of the list price was the discount?

3. A washing machine had a sale price of P10,500. If it was discounted 30%,

what was its original list price?

Prepared by: Frederick M. Manuel, PhD

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BUYING

Lesson 2

 Discount Series

When two or more trade discounts are offered on the same article,
these discounts are known as discount series.

In solving for the discount series, the following steps must be followed:
1. Express all discounts in decimals
2. Subtract each of the results in step (1) from 1
3. Multiply results in step (2) together
4. Subtract from 1 the product obtained from step (3). The remainder
must be changed to percent.

Example 1:
Find the single discount rate equivalent to the discount series of 30%
and 10%.

Solution:

Step 1. 30% is 0.30

10% is 0.10

Step 2. 1 – 0.30 = 0.70

1 – 0.10 = 0.90

Step 3. (0.70) (0.90) = 0.63

Step 4. 1 - 0.63 = 0.37 or 37%

Another method of solving discount series follows very closely the

suggested procedure for solving the net price given the list price less a series
of discounts. All the data will be interpreted in terms of percent, 100%
representing the list price, each discount is successively applied to the list
price and the resulting remainder.

Illustration:

Consider Example 1:

100% List Price

Less: 30% (1st discount sale)
70% (1st remainder)
Less: 7% (10% of the 1st remainder)
63% (net price)

Therefore, the equivalent single sale is 37%.

Prepared by: Frederick M. Manuel, PhD

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To check: 100% - 63% = 37%

The third method is used when the discounts are only two or taken two at a
time.

The following steps are followed:

1. Add the two discounts
2. Multiply the two discounts
3. Subtract the product from the sum to get the single equivalent rate.

Illustration:

From Example 1:

Step 1. 30% + 10% = 40%

Step 2. 30% (10%) = 3%

Step 3. 40% - 3% = 37%

Example 2:

Which is a better offer, a discount series of 20%, 15%, and 10%, or 44%?

Solution:

Method 1:

Step 1. 20% = 0.20

15% = 0.15
10% = 0.10

Step 2. 1 – 0.20 = 0.80

1 – 0.15 = 0.85
1 – 0.10 = 0.90

Step 3. (0.85) (0.80) (0.90) = 0.612

Sep 4. 1 – 0.612 = 0.388 or 38.8%

Method 2:

100%
- 20%
80%
- 12% (15% of 80%)
68%
- 6.8% (10% of 68%)

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61.2%
Then: 100% - 61.2% = 38.

 LEARNING ACTIVITY Find the single discount rate equivalent

of the following discount series

1. 20% and 15%

2. 40%, 25%, and 12%

1 3 2
3. 7 %, 9 % and 16 %
2 4 3

4. 5%, 15%, and 20%

1 2 3
5. 333 %, 163 % and 54 %

Solve each of the following problems in the discount series:

1 3
1. Which is a better offer, a discount series of 20%, 152 % and 224 % or a single
discount of 60%?

2. Which offers the biggest discount?

RJ Emporium with discounts of 20%, 15%, and 10%
SM Superstore with discounts of 23%, 5%, and 15%
Robinson Store with discounts of 12%, 20%, and 14%

3. A computer set is to be sold for P50,000. It is subject to a discount series

1
of 20%, 102 %, and 15%. At what price should it be marked?

Prepared by: Frederick M. Manuel, PhD

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BUYING

Lesson 3

 Retail Discount

Retail discounts and trade discounts are essentially the same. A retail
discount, whether a single rate of discount or a discount series, is a deduction
from a list price or catalogue price and is used in determining the actual
selling price of the goods, and is offered by retailers to consumers. The list
price of the marked price or quoted price are commonly known as the
markdown. The price which the customer actually pays for the merchandise
is the selling price or net price.

Example 1:

Aaron bought a component set an appliance center. The list price of the
component set is P65,000 with 8% discount. How much did he actually pay?

Given:
List price = P65,00
Discount sale = 8%

Solution:
Retail discount = P65,000 x 8% = P5,200
Net price = P65,000 – P5,200 = P59,800

Example 2:

A discount of P5,000 was given to Eric when he bought a TV set with a list
price of P30,000. Find the discount rate.

Given:
Retail discount = P5,000
List price = P30,000

Solution:

retail discount
Rate of discount = list price

P5,000
= P30,000

2
= 163%

Prepared by: Frederick M. Manuel, PhD

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Example 3:

How much must a student pay for a school bag marked P250 less 15% discount?

Given:
List price = P250
Discount rate = 15%

Solution:
Retail discount = P250 x 15% = P37.50
Net price = P250 – P37.50 = P212.50

 LEARNING ACTIVITY Solve the following:

1. A sala set priced at P15,000 was offered to a customer with a discount of

P2,500. What was the rate of retail discount?

2. The Rose RTW shop lists the price of a dress at P1,050. If a customer is
allowed a retail discount of 25%, how much should she pay for the dress?

3. A basket a grapes was sold with a discount of P50 which is 15% of the
original price. How much did the basket of fruits sell?

Prepared by: Frederick M. Manuel, PhD