Business Mathematics - Single Trade Discounts and Discounts Series67

BUSINESS
MATHEMATICS
Creator of all things,
true source of light and wisdom, origin of all being,
Graciously let a ray of your light penetrate the darkness of my
understanding.
Take from me the double darkness in which I have been born,
an obscurity of sin and ignorance.
Give me a keen understanding, a retentive memory, and the ability to grasp things
correctly and fundamentally.
Grant me the talent of being exact in my explanations and the ability to express
myself with thoroughness and charm.
Point out the beginning, direct the progress, and help in the completion.
I ask this through Christ our Lord.
Amen.
Learning Objectives:
1. Compute net price using the discount

method and the complement method.
2. Illustrate how to compute single trade
discounts to discounts series.
Chapter 3
Mathematics of
Merchandising
Introduction
In this chapter, we will discuss discounts, markup,
markdown, and break-even points. All of these
include price, which is central factor in buying and
selling. Examples will be presented to illustrate the
formulas for each concept introduced.
Single Trade Discounts
and Discounts Series
Single Trade Discounts and Discounts Series
The movement of materials as they flow from their source

to their early customer is called a supply chain. A typical
supply chain flow of goods to shown in the following figure:
Manufacturer Distributor Wholesaler Retailer Consumer

Large fast food chains such as Jollibee and

McDonald’s can go directly to the manufacturer for
most items or even do their own manufacturing. They
can have items manufactured to their exact
specifications for a contracted price. They reduce their
cause by eliminating the distributors.
Manufacturers, distributors, and wholesalers
frequently offer trade discounts generally based on the
volume purchased. Trade discounts are list price
reductions that a business may offer to its business
customers. A trade discount is calculated on the list per
item, rather than on the total amount due, because
different trade discounts maybe applied to different
items.
Two traditional methods for computing
trades discounts
Discount method – is useful when you want to know both
the net price and the actual amount of the trade discount.
Complement method – is used to find only the net price. It
gets its name because you use the complement rate, which
is 100% minus the discount rate.
Steps to Compute Net Price with the Discount
Method
a. Multiply the discount rate by the list price to get the
discount amount.
Discount = Trade discount rate × list of the price
b. Subtract the discount from the list price to get the net
price.
Net price = list price – discount
Example 1
Bakal supply Merchandise sells a set of stainless steel
trays to Lara’s Cookie Shop. The list price is ₱3,500 and
Lara qualifies for a 30% discount.
Solution:
We will use discount method to compute the net price.
Step 1: Discount = 0.30 x ₱3,500 = ₱1,050
Step 2: Net price = ₱3,500 - ₱1,050 = ₱2,450
Steps to Compute the net Price with the
Complement Method
Step 1: Subtract the discount rate from 100% to get the
complement rate.
Complement rate = 100% - trade discount rate
Step 2: Multiply the complement rate by the list price to
get the net price.
Net price = Complement rate x price list
Example 2
Find the net price from example 1 using the
complement method.
Bakal supply Merchandise sells a set of stainless steel
trays to Lara’s Cookie Shop. The list price is ₱3,500 and
Lara qualifies for a 30% discount method.
Solution:
We follow the steps of the complement method
Step 1: Complement rate = 100% - 30% = 70 %
Step 2: Net price = 0.70 x ₱ 3,500 = ₱ 2,450
Example 3
A manufacturer can cover its cost and make a
reasonable profit if it sells its product for ₱262.50. At what
price should the product be listed so that a discount of
30% can be allowed?
Solution:
Net price = Complement rate x list price
₱262.50 = 0.70 x list price
₱262.50
List price =
0.70
List price = ₱ 375.00
The product should be listed at ₱ 375.00

Example 4
A bicycle is listed in a wholesaler's catalog at
₱5, 450.00. The bicycle is sold to retailer for a net price of
₱4, 087.50 what rate of trade discount was given?
Solution:
Discount = Trade discount rate x list price
First, we compute the discount.
Discount= ₱5,450.00 - ₱4,087.50 = ₱1,362.50
Hence,
₱1,362.50 = Trade discount rate × ₱5,450.00
₱1,362.50
Trade discount rate = ₱5,450.00
Trade discount rate = 0.25
A 25% trade discount was given to the wholesaler.
A distributor or manufacturer may give a trade
discount that has two or more discounts, called a series
of discount or a discount series.
For example, the trade discount may be 20%, 15%, 10%.

To find the net price, the first discount is based on the
list price. The second discount is based on the
remainder after deducting the first discount. The third
discount is based on the remainder after deducting the
second discount, and so on.
Both the discount method and the complement
method can be used to compute the net price for a
series of discounts.
Example 5
Plato Marketing sells a particular kind of plate with a list
price, ₱200. Giok’s Fastfood qualifies for the series discount
of 25%, 20%, 10%. Compute the net price using the discount
method.
Solution:
We will use the discount method to compute the net price.
First Discount Second Discount Third Discount
Step 1 0.25 × ₱200 = ₱50 0.20 × ₱150 = ₱30 0.10 × ₱120 = ₱12
Step 2 ₱200 − ₱50 = ₱150 ₱150 − ₱30 = ₱120 ₱120 − ₱12 = ₱𝟏𝟎𝟖
Example 6
of, 25%, 20%, 10%. Compute the net price using the
complement method.
Solution:
Using the complement method to compute the net price,
we obtain the following values.
First Discount Second Discount Third Discount
Step 1 100% − 25% = 75% 100% − 20% = 80% 100% − 10% = 90%
Step 2 0.75 × ₱200 = ₱150 0.80 × ₱150 = ₱120 0.90 × ₱120 = ₱𝟏𝟎𝟖
When using complement rates, an efficient shortcut is to
multiply the list price by all the complement rates
successively. This is illustrated in the next example.
Example 7
Using the data in example 5, calculate the net price using
the shortcut.
of 25%, 20%, 10%. Compute the net price using the discount
method.
of, 25%, 20%, 10%. Compute the net price using the discount
method.
Solution:
The list price is ₱200, and the discounts are 25%, 20%,
and 10%. The complement rates are 75%, 80%, and 90%.
Hence,
Net Price = ₱200 x 0.75 x 0.80 x 0.90 = ₱108
Example 8
A retail kiosk has listed a mobile phone case for ₱136
less 30%. A department store in the shopping mall lists
the same case for ₱126 less 20%, less an additional 15%.
What additional rate of discount must the kiosk give to
meet the department store price?
Solution:
Using the complement method, we have:
Kiosk net price = 0.70 x ₱136 = ₱95.20
The shortcut gives us
Department store price = ₱126 x 0.80 x 0.85 = ₱85.68.
The difference between the retail Kiosk net price and the
department store price is ₱9.52. Hence,
9.52
Additional rate of discount needed = = 𝟎. 𝟏 𝐨𝐫 𝟏𝟎%
95.20
Example 9
A retail shop bought shirts at a net price of ₱477.36 each,
after discounts of 15%, 10%, and 4%. What is the list price?
Solution:
Net price = List price x (1 – 0.15) x (1 – 0.10) x (1 – 0.04)
₱477.36 = List price x 0.85 x 0. 90 x 0.96
477.36
List price = 0.85 ×0.90×0.96 = ₱650
The shirts are listed at ₱650 each.

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BUSINESS

1. Compute net price using the discount

The movement of materials as they flow from their source

Manufacturer Distributor Wholesaler Retailer Consumer

Large fast food chains such as Jollibee and

The product should be listed at ₱ 375.00

For example, the trade discount may be 20%, 15%, 10%.

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