Trade Discounts

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 for
payment and other special
considerations.

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When a manufacturer sells
an item to a retailer, the
manufacturer usually
provides a suggested list or
retail price.
 LIST PRICE
It represents the price for which the retailer
should sell the item. Now, if the retailer sells
the items 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

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 TRADE DISCOUNT
It is the 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 products to the final
customer.

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 SINGLE TRADE DISCOUNT
A single trade discount is usually
represented as a percentage of list price.
Thus, a manufacturer would state a list
price less 30% trade discount. This means
that the price to be paid by the retailer is
the list price less 30%
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 TRADE DISCOUNT

It is the difference between

the list price and the net
purchase price.
 LIST PRICE
It is the manufacturer’s
recommended price for which the
retailer should sell the item. It is
sometimes called the RETAIL
PRICE.
 NET PURCHASE PRICE

It is the amount of item to be paid

by the retailer to the manufacturer.
The trade discount is computed
in terms of the list price and the
net price using the following
formula:

= -
The trade discount is computed
in terms of the list price and the
rate of trade discount using the
following formula:

= x
The net price is given by the
formula:

= -
=
 Example 1
An item listed at Php 8 000 is
subject to a discount of 25%.
What is the amount of discount
and the net price?
 Example 2
The JNT Garment Factory has sold Php 20 000
worth of clothes to the Manansala Boutique store.
The given amount represents the retail price of the
clothes for which the JNT Garment factory has
offered 35% trade discount.
A. What is the actual amount paid by Manansala
Boutique Store?
B. What is the trade discount?
 Example 3
A 30% discount on a desk top
computer amounted to Php 15
000. What are the list price and
the net price of the computer?
 Example 4
What is the discount rate if the net
price of an item is Php 5 567.80,
after giving a discount of Php
252.20?
 Solve the given problem.

An item with a list price of Php

1256.40 is offered at a discount of
37.5%. What is the net price?
 Solve the given problem.

A 17.5% discount on a flat- screen

TV amounts to Php 16 500. What
is the list price?
 Solve the given problem.
A manufacturer offers a 12.5%
discount for radio cassette. If the
net price is Php 3 450, what is the
suggested retail price?
 Solve the given problem.
A store advertises a discount of
Php 144.75 on a pair of shoes. If
the discount is 25%, how much do
the shoes cost?
 Solve the given problem.

A mountain bike listed for Php 39

750 is sold for Php 28 820. What
rate of discount has been given?