Gross Margin Trade Discount Discount Series 1

Gross Margin, Trade
Discount and
Discount Series
 Differentiate mark-up
from margins
 Describe how gross
margin is used in sales
Choose the correct answer . Write the letter
only.
1. What do you call the sales

minus the cost of goods sold?
a. mark-down
b. margin
c. mark-on
d. mark-up
2. What do you call the amount the
manufacturer deducts from the list
price of the item?
a. discount series
b. margin
c. mark-up
d. trade discount
3. What is the account used to report
the selling price of the merchandise?
a. cost of sales
b. list price
c. margin
d. sales
4. A product sells for ₱100 and
costs ₱85 to manufacture it. How
much is the margin in
percentage?
a. 0.15%
b. 0.85%
c. 15%
d. 85%
5. A seller of books wanted a mark-
up based on cost of 20%. If his book
costs ₱550, how much will be the
mark-up?
a. ₱27.50
b. ₱110
c. ₱2,750
d. ₱11,000
6. Mona sold her craft at a selling
price of ₱750. The cost of her craft
amounts to ₱475. What is the gross
profit margin?
a. 0.37%
b. 0.58%
c. 37%
d. 58%
Complete the table .
SELLING COST MARK UP MU % MU % SP
PRICE COST
Complete the table .
1.________ P120.00 P100.00 2. _______ 3.________
P200.00 P135.00 4.________ 48.15% 5. _______
P399.00 6.________ 7.________ 8. _______ 28%
P3,200.00 P2,755.00 9. _______ 16.15% 10. ______

Unlocking of Terms:
Computing for discounts

makes use of our basic percentage problem
formula P=BR,
where
The base (B) is the list price,
The rate (R) is the discount rate,
The percentage (P) is the discount.
Unlocking of Terms:
Computing for discounts

makes use of our basic percentage
problem formula P=BR,
𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 = 𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒 𝑥 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒

Cost of goods sold or cost of sales
– is how much the seller buys the

item.
Discount series
– is a type of discount in which
several discounts are given at
different times and different
conditions.
– given to customers in order to
encourage them to purchase in
volume.
List price
– is the fee for a service or product

before discounts are reduced or
sales are added.
– is a suggested price to a certain
item set by the manufacturer or
supplier
Margin (Gross Margin)
– sales minus the cost of goods sold

or cost of sales.
Mark-up
– the amount by which the cost of a

product is increased in order to
derive the selling price.
–the sum of the expenses and profits.

Net price
– is the final charge you pay for a

product or service after discounts
and sales taxes are computed.
–Is the amount after the discount has
been deducted
Sales
– is the account used to report the

selling price of the merchandise.
Trade discount
– is a reduction from list price granted
to buyers.
–is the amount by which the retail

price of a product is reduced by the
manufacturer when it is sold to the
reseller or customer.
Problem:
1. A certain rice distributor is giving

8% discount to his regular retailers. If
the price per sack is P1,240.00, how
much trade discount will be received
by a retailer if the order is 50 sacks?
How does gross margin
used
in sales?
Example 1: If a flowerpot sells for ₱300
& costs ₱200 to produce, its margin
would be calculated as ₱100.
Margin = ₱300 - ₱200

= ₱100
If expressed in percentage terms,
margin percentage will be 33.33%
= gross margin divided by total sales
(₱100/₱300) X 100.
This is the mark-up based on sales or

selling price.
The difference between profit margin
and mark-up is that profit margin is
sales minus the cost of goods sold;
meanwhile, mark-up is the amount
by which the cost is increased on a
product to arrive at the selling price.
Discount Series
– are usually established by discount

rates, given in percent or decimal
form, based on the money owed.
– is a percentage of the list price.
Trade discount series
– additional discounts that are

deducted one after another from the
list price.
How to compute Trade Discount
using a Single trade discount rate?
Trade discount
=single trade discount rate x list price
T=RxL
How to compute the net price using
the trade discount?
Net price = list price – trade discount

N=L–T
Example1. What is the net price (N) of a
compressor nebulizer with a list price of
₱1,050.00 subject to 15% discount?
Given: List Price = ₱1,050.00
Discount Rate = 15%
Find: a. Discount
b. Net Price
Solutions:
a. Discount = List Price X Discount Rate
= ₱1,050.00 X 15%
= ₱157.50
b. Net Price = List Price – Discount
= ₱1,050.00 - ₱157.50
= ₱892.50
Solutions:
Net Price (N) rate = 100% - Discount Rate
N rate = 100% - 15%

N rate = 85%
Net Price = List price x N rate
= ₱1,050.00 X 85%
= ₱892.50
How to get the Discount?
Net Price-List Price
How to compute Series of Discounts?
How much is the discount and the net price of a

cellular phone listed at ₱5,720.00 if given a 20%
and 5% discount?
Given: List Price = ₱5,720.00

Discount Rates = 20% and 5%
Find: a. Discount
b. Net Price
Method 1
List Price ----------------------------₱5,720.00
Less 20% (₱5,720 X 20%) --------- 1,144.00
Difference ---------------------------₱4,576.00
Less 5% (₱4,576 X 5%) ------------ 228.80
Net Price -----------------------------₱4,347.20
Total discount = ₱1,144 + ₱228.80

= ₱1,372.80
Method 2
100% - 20% (first discount rate) = 80%
List price ------------------- ₱5,720.00
First balance rate ------------- X 80%
First balance ---------------₱4,576.00
100% - 5% (second discount rate) = 95%
First balance -------------- ₱4,576.00
Second balance rate------------ X 95%
Net Price ------------------- ₱4,347.20
Method 2
Discount = List price – Net Price
= ₱5,720.00 - ₱4,347.20
= ₱1,372.80
Method 3
100% - 20% = 80%
100% - 5% = 95%
80% X 95% = 76% (N rate)

100% - 76% = 24% (Single equivalent rate)
Take note that if we add the net price (N) rate

and the single equivalent discount rate, we will
get 100%.
Method 3
Discount = List price x Single
equivalent discount rate
= ₱5,720.00 x 24%
= ₱1,372.80
Net Price = List price – Discount
= ₱5,720.00 - ₱1,372.80
= ₱4,347.20
Problem:
8% discount to his regular retailers.
If the price per sack is P1,240.00,
how much trade discount will be
received by a retailer if the order is
50 sacks?
Problem:
8% discount to his regular retailers.
If the price per sack is P1,240.00,
how much trade discount will be
received by a retailer if the order is
50 sacks?
Solution:
Total Selling Price = 50 X 1,240
= P 62,000.00
Trade Discount = 0.08 X P62,000
= P4,960.00
A retailer will receive P4,960.00 trade
discount from a rice distributor
Problem:
2. My mother wanted to buy a pair of
earrings offered for P18,000.00
payable in 6 months. She asked for
12% discount if she paid in cash and
was granted. How much was she
going to pay for a pair of earrings?
Problem:
2. My mother wanted to buy a pair of
earrings offered for P18,000.00
payable in 6 months. She asked for
12% discount if she paid in cash and
was granted. How much was she
going to pay for a pair of earings?
Direction: Read and analyze the problem
carefully. Solve each problem by showing all
your solutions.
1. A living room set worth ₱5 250.00
was granted a discount of ₱345.00.
Find the: a. Discount rate
b. Net invoice price
c. Net invoice price rate
Direction: Read and analyze the problem
carefully. Solve each problem by showing all
your solutions.
2. A GoPro camera is listed at ₱13
651.00 less 15% and 4%.
Find the: a. Net Invoice Price
b. Discount using Method 1
c. Discount using Method 2
d. Discount using Method 3

Gross Margin Trade Discount Discount Series 1

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Gross Margin, Trade

1. What do you call the sales

1.________ P120.00 P100.00 2. _______ 3.________

P200.00 P135.00 4.________ 48.15% 5. _______

P399.00 6.________ 7.________ 8. _______ 28%

P3,200.00 P2,755.00 9. _______ 16.15% 10. ______

Computing for discounts

Computing for discounts

𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 = 𝐿𝑖𝑠𝑡 𝑃𝑟𝑖𝑐𝑒 𝑥 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒

– is how much the seller buys the

– is the fee for a service or product

– sales minus the cost of goods sold

– the amount by which the cost of a

–the sum of the expenses and profits.

– is the final charge you pay for a

– is the account used to report the

–is the amount by which the retail

1. A certain rice distributor is giving

Margin = ₱300 - ₱200

This is the mark-up based on sales or

– are usually established by discount

– additional discounts that are

Net price = list price – trade discount

N rate = 100% - 15%

How much is the discount and the net price of a

Given: List Price = ₱5,720.00

Total discount = ₱1,144 + ₱228.80

80% X 95% = 76% (N rate)

Take note that if we add the net price (N) rate

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1.____ P120.00 P100.00 2. _ 3.______

P200.00 P135.00 4.__ 48.15% 5. _

P399.00 6.__ 7. 8. _ 28%

P3,200.00 P2,755.00 9. _ 16.15% 10.