Trade Discounts

Definition:

The List price is the manufacturer’s retail price of a

product. A trade discount is an amount deducted from
the list price of a product.
Method 1. Discount Method
I. Discount = Rate of Discount × List
price
II. Net Price = List Price – Discount
Example 1:
An auto supply store sells auto spare parts for ₱9,600.00, subject to a
12% trade discount. Calculate the
1. Amount of trade discount, and
2. Net price
Example 2:

Flor pays ₱390.00 for a dress listed at ₱650.00. What

was the rate of discount?
Method 2. Complement Method
i. Complement Rate = 100% - Trade Discount Rate
ii. Net Price = Complement Rate × List price
Example 1:
An auto supply store sells auto spare parts for ₱9,600.00, subject to a
12% trade discount. Calculate the
a. Net price
Multiple Discount
Sellers may offer successive trade discount to dispose of their goods
quickly. This is often called a multiple trade discount series.
Example 1:
A list price of a large flat screen television set is ₱27,450.00, subject to
10%, 8%, and 5% trade discounts. Compute the net price of the
television set.
Using the discount method, we have the following successive net prices.

List Price Rate of Discount Discount Intermediate/Net Price

₱27,450.00 10% (0.10)(27,450) = ₱2,745.00 ₱27,450 - ₱2,745 = ₱24,705.00

₱24,705.00 8% (0.08)(24,705) = ₱1,976.40 ₱24,705 - ₱1,976.40 = ₱22,728.60

₱22,728.60 5% (0.05)(22,728.60) = ₱1,136.43 ₱22,728.60-₱1,136.43 = ₱21,592.17

Example 2:
Use the complement method to compute the net price of the
merchandise in Example 1