Business Mathematics & Statistics (MTH 302)

MTH 302
LECTURE 12
RATIO AND PROPORTION
MERCHANDISING
1 OBJECTIVES
The objectives of the lecture are to learn about:
 Module 3
 Review Lecture 11
 Ratio and Proportions
 Merchandising
 Assignment 1A and 1B

2 MODULE 3
Module 3 has the following content:
 Ratio and Proportions
 Merchandising

(Lectures 12)
 Mathematics of Merchandising

(Lectures 13-16)

2 ESTIMATING USING RATIOS-EXAMPLE 1

In the previous lecture, we studied how ratios can be used to determine unknowns.
Here is another example with a slightly different approach. Here, the ratios of
quantities are known. Only one quantity is known. How do we estimate the total
quantity that can be made? It is the quantity of orange juice that will determine the
total quantity that can be made. Again the method is to use the ratio of the unknown
to the known.

Punch recipe

Ratio of mango juice, apple juice and orange juice: 3:2:1.

If you have 1.5 litres of orange juice, how much punch can you make?

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Calculation

Mango juice : Apple juice : Orange juice

3 : 2 : 1

Total = 6

X? : Y? : Z=1.5

Total = ? litre

Mango juice X = (3/1)*1.5 = 4.5 litre

Apple juice Y = (2/1)*1.5 = 3.0 litre

Orange juice Z = 1.5 litre

Total = 4.5 + 3.0 + 1.5 = 9 litre

EXCEL Calculation
The method used is the same as used in previous examples.

4 ESTIMATING USING RATIOS-EXAMPLE 2

In this example, the ratios are the same. Quantity of orange juice is known. The
quantity of mango and apple juice is to be calculated if the total requirement is 500
litre.

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Punch recipe
The ratio of mango juice, apple juice and orange juice is 3 : 2 : 1.5

If you have 500 milliliters of orange juice, how much mango juice and apple juice is
needed?

Mango juice : Apple juice : Orange juice

3 : 2 : 1.5

Total = 6.5

X? : Y? : Z = 500 litre

Total = ? litre

Mango juice X = (3/1.5)*500 = 1000 litre

Apple juice Y = (2/1.5)*500 = 667 litre

Orange juice Z = 500 litre

Total = 1000 + 667 + 500 = 2167 litre

EXCEL Calculation
Here also ratios were used.
Mango = B45/B47*D47
Apple = B46/B47*D47
Orange = D47

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Business Mathematics & Statistics (MTH 302)

5 EXERCISE

In a certain class, the ratio of passing grades to failing grades is 7 to 5. How many
of the 36 students failed the course?

The ratio, "7 to 5" (or 7 : 5 or 7/5), tells you that, of every 7 + 5 = 12 students, five
failed.

That is, 5/12 of the class flunked.

Then (5/12 )(36) = 15 students failed.

6 PROPORTION
a/b = c/d

...the values in the "b" and "c" positions are called the "means" of the proportion,
while the values in the "a" and "d" positions are called the "extremes" of the
proportion. A basic defining property of a proportion is that the product of the
means is equal to the product of the extremes. In other words, given:

a/b = c/d

...it is a fact that ad = bc.

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7 PROPORTION-EXAMPLES
Is 24/140 proportional to 30/176?

Check:
140×30 = 4200
24×176 = 4224

So the answer is that:

They are not proportional.

8 PROPORTION EXAMPLE 1

Find the unknown value in the proportion:  2 : x = 3 : 9.

2:x=3:9

First, convert the colon-notation ratios to fractions:

.2/x  =  3/9

Then solve:

.2/x  =  3/9
18 = 3x
6=x

9 PROPORTION EXAMPLE 2

Find the unknown value in the proportion:  (2x + 1) : 2 = (x + 2) : 5

(2x + 1) : 2 = (x + 2) : 5

First, convert the colon-notation ratios to fractions:

(2x + 1)/2   =  (x + 2)/5

Then solve:

(2x + 1)/2   =  (x + 2)/5

5(2x + 1) = 2(x + 2)
10x + 5 = 2x + 4
8x = –1
x = –1/8

10 MERCHANDISING

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What does merchandising cover?

 Understand the ordinary dating notation for the terms of payment of an
invoice.
 Solve merchandise pricing problems involving mark ups and markdowns.
 Calculate the net price of an item after single or multiple trade discounts.
 Calculate a single discount rate that is equivalent to a series of multiple
discounts.
 Calculate the amount of the cash discount for which a payment qualifies.

10 STAKEHOLDERS IN Merchandising
Who are the stakeholders in merchandising?
The main players are:

 Manufacturer
 Middlemen
 Receive varying levels of trade discounts
 Retailer
 Consumer

There are discounts at all levels in the above chain.

11 Trade Discount

If L is the list price, then discount is calculated as % of this price. List price less
discount is the net price. In mathematical terms, we can write:

Amount of discount = dL

D = Discount

L = List Price

Net Price = L(1 – d)

Net Price = List Price – Amount of Discount

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