Chapter – IV
BUYING & DISCOUNT
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Dr.Karthik Mohandoss
303203 - MATHEMATICS OF FINANCE
Middlemen
Middlemen
Distributor
Wholesaler
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Manufacturer
Receive
varying
levels of
‘trade
discounts’
Consumer
Retailer
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Middlemen
Distributor
For example 15% off first
… then
… then a further
Note This
10%
5%
off next
Wholesaler
off next
does not mean a TOTAL of 30%
Discount!
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This refers to the giving of further
discounts as incentives for more sales.
WHAT IS A TRADE DISCOUNT?
A special discount when goods and services are purchased from one
business by another business.
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A trade discount is a reduction to the published price of a
product. For example, a high-volume wholesaler might be
entitled to a 40% trade discount, while a medium-volume
wholesaler is given a 30% trade discount. The use of trade
discounts allows for having just one published price for each
product. Trade discounts are different from early-payment
discounts.
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WHAT IS A PURCHASE DISCOUNT?
A purchase discount is a deduction that may be available
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to a buyer if the buyer pays an invoice within a
prescribed time. For example, a supplier's invoice for
OMR1000 with the credit terms 2/10 net 30 indicates
that the buyer will be allowed a purchase discount of
OMR20 (2% of $1000) if the buyer pays within 10 days.
If the buyer pays in 30 days, there is no purchase
discount.
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WHAT IS
SALES DISCOUNTS?
Cash discount is given to a customer in advance of an
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invoice payment . Its not like an rebate or refund.
Amount of discount = discount rate*list price
Net Price = List Price – Amount of Discount
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WHAT IS DISCOUNT SERIES?
A discount series is a type of discount in which several discounts are
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given to a purchaser at different times and dependent on the
occurrence of different conditions. For example, a discount series
might be stated as 20/10/5, where 20 percent of the discount is given
at the time of sale, 10 percent is given if a certain volume is reached,
and 5 percent is given if payment is made within a specified period
of time. The discount series is set up to provide an incentive to
customers to engage in specific actions, such as purchasing a
specific volume or paying their balance on time
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Solved and practice problems
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1. In a video store, a DVD that sells for $15 is marked "10% off."
What is the discount? What is the sale price of the DVD?
Stores often sell goods for a discounted price. Typically, a store will
discount an item by a percent of the original price. In this problem,
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an item that originally costs $15 is being discounted by 10%. So
"10% off" refers to the rate of discount. To solve this problem, we
need a procedure.
The discount is: 0.10 x $15.00 = $1.50
$15.00 (original price ) - 1.50 (discount)
$13.50 is the sale price
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2. In a department store, a $40 dress is marked, "Save 25%." What is
the discount? What is the sale price of the dress?
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The phrase, "Save 25%," refers to the rate.
The original price of the dress is $40.
The discount is: 0.25 x $40.00 = $10.00
The sale price is calculated as follows:
$40.00 (original price) - 10.00 (discount)
= $30.00
The discount is $10.00 and the sale price is $30.00.
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3. In a grocery store, a $12 case of soda is labelled, "Get a 20%
discount." What is the discount? What is the sale price of the case of
soda?
The discount is: 0.20 x $12.00 = $2.40
The sale price is calculated as follows:
$12.00 (original price) - 2.40(discount)
=$ 9.60
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The phrase, "Get a 20% discount," refers to the rate of
discount
The discount is $2.40 and the sale price is $9.60.
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4. In a candy store, a $5.00 jar of candy is labelled, "50% off." What
is the discount? What is the sale price of the jar of candy?
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The discount is: 0.50 x $5.00 = $2.50
The sale price is calculated as follows:
$5.00 (original price) - 2.50(discount)
=$2.50
The discount is $2.50 and the sale price is $2.50.
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5. A pizzeria has a coupon that reads, "Get 1/3 off on a $9.00 cheese
pizza." What is the discount? What is the sale price of the cheese
pizza?
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The phrase, “1/3 off," refers to the rate. It is expressed as a
fraction.
The discount is: 1/3 x $9.00 = $3.00
The sale price is calculated as follows:
$9.00 (original price) - 3.00 (discount)
=$6.00
The discount is $3.00 and the sale price is $6.00.
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Stores often sell goods for a discounted price. Typically, a
price. The rate of discount is usually given as a percent,
but may also be given as a fraction. The phrases used for
discounted items include, " off," "Save 50%," and "Get a
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store will discount an item by a percent of the original
20% discount."
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EXERCISE PROBLEM FOR
BUYING AND SELLING
1.The
of
office
series
discounts
furniture
are
20%,
is
$20000.
10%,
5%.
What is the net price?
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The
price
2.A stereo unit has a list price of $1000. It goes on sale at a
discount of 30% and then goes on a clearance for an
additional 20% off. what is the final price of stereo?
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3.A manufacturer of plumbing fixtures labels a sink with a
plumber gets a 40% discount, and a consumer gets a 15%
discount. How much will each pay for the sink?
4.Compute the discount rate for a $450 lamp
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list price of $300.His wholesaler gets a 50% discount, a
which is sold
for $315.
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5.A lamp which normally sells for $180 was purchased by
a consumer for $120. How much discount did the
6.A $400 barbecue is put on sale at 30% off. At the end of
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consumer receive?
the summer, it is put on clearance for 50% off the sale
price. What is the single discount equivalent to the chain
discount of 30% and 50% off?
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7.What is the selling price of a cashmere coat which lists for
$400, goes on sale for 40% off , and then goes on
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clearance for additional 20% off the sale price?
8.Compute the sale price of a kitchen stove whose list price
is $1400 if it is given successive discount of 25% and
40%.verify the price is the same regardless of the order in
which the discount are taken.
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Dr.Karthik Mohandoss
THANK YOU
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