Chapter 7­1 ­ Trade Discounts ­ Single and Chain List Price​
­ the price from the manufacturer Trade Discount Rate​
­ the percentage off the list price a retailer may deduct Trade Discount Amount​
­ The amount of money you may subtract from the list price Net Price​
­ the price that the retailer pays (list price ­ trade discount amount) Example #1: A manufacturer offers a product at a list price of $7,775.50 with a trade discount rate of 25%. What is the net price? List price = 7,775.50 Trade discount rate = 25% Trade Discount Amount = List Price X Trade Discount Rate Trade Discount Amount = 7,775.50 X .25 1,943.88 = 7,775.50 X .25 1,943.88 = Trade Discount Amount Net Price = List Price ­ Trade Discount Amount Net Price = 7,775.50 ­ 1,943.88 5,831.62 = 7,775.50 ­ 1,943.88 5,831.62 = Net Price Example #2: A manufacturer offers a product at a list price of $2,700 with a trade discount rate of 40%. What is the net price? List price = 2,700 Trade discount rate = 40% Trade Discount Amount = List Price X Trade Discount Rate Trade Discount Amount = 2,700 X .40 1,080 = 2,700 X .4 1,080 = Trade Discount Amount Net Price = List Price ­ Trade Discount Amount Net Price = 2,700 ­ 1,080 1,620 = 2,700 ­ 1,080 1,620 = Net Price You can also calculate the net price using the complement of the rate discount rate. The complement is 100 minus the trade discount rate. Example #2 again: The List price was 2,700 The complement of the trade discount rate is 60% or .6 2,700 X .6 = 1,620 The net price is $1,620 Finding the List Price List price = ​
Net Price Complement of Trade Discount Rate Example #2 yet again: The net price is 1,620 and you had a 40% trade discount. What is the list price? The complement of 40% is 60% or .60 List Price = ​
Net price Complement List price = ​
1,620 .60 List price = $2,700 Examples to Try: #1 ­ The list price of a dining room set with a 40% trade discount is $12,000. What are the trade discount amount and net price? #2 ­ The net price of a video system with a 3% trade discount is $1,400. What is the list price? #1 12,000 x .4 = 4,800 trade discount amount 12,000 x .6 = 7,200 net price #2 100 ­ 3 = 7% = .97 1,400 divided by .97 = $14,43.30 (list price) Calculate the following: Item List price Trade Discount Trade Discount Amount Net Price iPhone $200 20% Electric Saw 75 $56 Bookcase $129 396 TV $1,200 30% Ladder $56 40.75 Bicycle 100 700 Drill $90 $68.50 Item List price Trade Discount Trade Discount Amount Net Price iPhone $200 20% 40 160 Electric Saw $75 25.33% $19 $56 Bookcase $525 24.57% $129 396 TV $1,200 30% 360 840 Ladder $56 27.23% $15.25 40.75 Bicycle $800 12.5% 100 $700 Drill $90 23.89% 21.50 $68.50 Chain Discounts A chain discount is a series of discounts, often written as follows: 20/15/10 would mean a 20% discount, followed by a 15% discount, followed by a 10% discount. each subsequent discount is taken on the NEW total. So, a 20/15/10 chain discount on $15,000 would be calculated as follows: 20% discount = 15,000 x .20 = 3,000 15,000 ­ 3,000 = 12,000 15% discount on 12,000 12,000 x .15 = 1,800 12,000 ­ 1,800 = 10,200 10% discount on 10,200 10,200 x .10 = 1,020 10,200 ­ 1,020 = 9,180 Net price = $9,180 Another way of calculating chain discounts is to convert all of the discounts into their complements, then convert them into decimals, multiply them together (which gives you the ​
Net Price Equivalent Rate​
), and then multiply that number by the list price. So with our example above: a 20/15/10 chain discount on $15,000 20% complement = 80% decimal = .8 15% complement = 85% decimal = .85 10% complement = 90$ decimal = .9 .8 x .85 x .9 = .612 (this is the net price equivalent rate) List price x .612 = Net Price 15,000 x .612 = 9,180 The net price is $9,180 The trade discount amount is 15,000 ­ 9,180 = 5,820 You can also calculate the Trade Discount Amount by subtracting the Net Price Equivalent Rate from 1, which gives you the Single Equivalent Rate. Multiply the Single Equivalent rate by the List Price for the Trade Discount Amount. 1 ­ net price equivalent rate = single equivalent rate single equivalent rate X list price = trade discount amount So in our example above: 1 ­ net price equivalent rate = single equivalent rate 1 ­ .612 = .388 single equivalent rate X list price = trade discount amount .388 X 15,000 = 5,820 Try This: Lamps Outlet bought a shipment of lamps from a wholesaler. The total list price was $12,000 with a 5/10/25 chain discount. Calculate the net price and trade discount amount. (Use the net price equivalent rate and single equivalent discount rate in your calculation) Calculate the complements 100 ­ 5 = 95 = .95 100 ­ 10 = 90 = .9 100 ­ 25 = 75 =.75 .95 x .9 x .75 = .64125 = net price equivalent rate 12,000 x .64125 = 7,695 (net price) 1 ­ .64125 = .35875 (single equivalent discount rate) 12,000 x .35875 = 4,305 (trade discount amount) Homework page 197 questions 7­1 through 7­7