Trade Discounts

1. SECTION 15-1 Trade Discounts

2. Key Words to Know list price The price at which a business generally sells an item, also called the catalog price. trade discount A discount off the list price of an item.

3. Key Words to Know trade-discount rate The amount of the discount of an item expressed as a percent of the list price. net price The price actually paid for a discounted item.

4. Formulas Trade Discount = List Price × Trade-Discount Rate Net Price = List Price – Trade Discount

5. Do Now Johnson Auto Repair Shop is purchasing an electronic ignition module for a sport coupe that is six years old. The list price in the wholesaler’s catalogue is $845. Johnson receives a 40 percent trade discount. What is the net price of the module?

6. Answer: Step 1 Find the trade discount. List Price ×Trade-Discount Rate $845 × 40% = $338.00

7. Answer: Step 2 Find the net price. List Price – Trade Discount $845.00 – $338.00 = $507.00

8. Assignment:Workbook p. 107 #1-10

9. SECTION 15-2 pp. 489-491 Trade Discount— Complement Method

10. Section Objective Calculate: • net price using the complement method

11. Formula Net Price = List Price × Complement of Trade-Discount Rate

12. Key Words to Know complement method A way to find the net price of a discounted item by subtracting the discount rate from 100 percent.

13. Do Now The list price of an electronic ignition module in the wholesaler’s catalog is $845. Repair shops receive a 40 percent trade discount. What is the net price of the module?

14. Answer: Step 1 Find the complement of trade-discount rate. 100% – 40% = 60%

15. Example 1 Answer: Step 2 Find the net price. List Price × Complement of Trade-Discount Rate $845.00 × 60% = $507

16. Formula #2 Net Price = List Price × Percent Price

17. Do Now Shelita Reeves runs Affiliated Lumber and buys paint from Dap Corporation. Dap grants a 40 percent trade-discount rate to all retail outlets. How much does Reeves pay for a case of white ceiling paint if it retails for $132.

18. Example 2 Answer Step: Find the net price List Price = List Price × Percent Price $132.00 × (100% − 40%) $132.00 × 60%= $79.20

19. SECTION 15-3 pp. 492-494 Trade-Discount Rate

20. Key Words to Know trade-discountrate The amount of the discount of an item expressed as a percent of the list price.

21. Formulas Trade Discount = List Price – Net Price Trade-Discount Rate = Trade Discount List Price

22. Do Now Auto Parts Manufacturing Company shows a $156 list price in its catalog for a water pump. The net price to the retailer is $117. What is the trade-discount rate?

23. Answer: Step 1 Find the trade discount. List Price – Net Price $156 – $117 = $39

24. Example 1 Answer: Step 2 Find the trade-discount rate. Trade Discount ÷ $156 = 25%

25. Assignment:WB Page 108 #1-12

26. SECTION 15-4 pp. 495-497 Chain Discounts

27. Section Objective Determine: • final net price after a chain of discounts

28. Key Words to Know chain discounts A series of trade discounts a supplier may offer to sell out a discontinued item or to encourage a customer to place a larger order.

29. Formula

30. Do Now Lawn Corporation produces a lawn mower which is priced at $695. A new model is ready for production, so the old model will be discontinued. Lawn Corporation is offering a chain discount of 20 percent less 10 percent, also written as 20/10. What is the final net price of the lawn mower?

31. Answer: Step 1 Find the first discount. List Price ×Discount Rate $695.00 ×20% = $139.00

32. Answer: Step 2 Find the first net price. List Price – Discount $695.00 – $139.00 = $556.00

33. Answer: Step 3 Find the second discount. $556.00 ×10% = $55.60

34. Answer: Step 4 Find the final net price. $556.00 – $55.60 = $500.40

35. Assignment:Workbook Page 109 #1-6

36. SECTION 15-5 Chain Discounts— Complement Method

37. Section Objective Compute: • final net price using the complement method

38. Key Words to Know net-price rate The percent of the price paid for an item, found by multiplying the complements of the chain discounts.

39. Formula Net Price Rate = Product of Complements of Chain-Discount Rates Net Price = List Price × Net-Price Rate

40. Do Now Dell’s manufactures a riding mower, which is priced at $1,450. A new model is ready for production, so the model will be discontinued. Dell’s is offering a chain discount of 25 percent less 20 percent less 10 percent. What is the net price for the mower?

41. Answer: Step 1 Find the complements. Complement of 25 percent: 100% – 25% = 75% Complement of 20 percent: 100% – 20% = 80% Complement of 10 percent: 100% – 10% = 90%

42. Answer: Step 2 Find the net-price rate. Product of Complements of Chain-Discount Rates 75% × 80% × 90%= $54%

43. Answer: Step 3 Find the net price. List Price ×Net-Price Rate $1,450 ×54% = $783

44. Key Words to Know single equivalent discount (SED) (p. 499) One discount that is equal to a chain discount.

45. Formula SED = Complement of Net-Price Rate Discount = List Price × SED

46. Example 2 In Example 1 the chain discount complements were 75 percent/80 percent/90 percent and the net-price rate was 54 percent. What is the SED? What is the discount?

47. SECTION 15-6 pp. 502-504 Cash Discounts— Ordinary Dating

48. Section Objective Compute: • cash price when the discount is based on ordinary dating

49. Key Words to Know invoice A bill listing the quantities and costs of items purchased. cash discount A discount a supplier grants if a bill is paid within a certain number of days.

50. Key Words to Know ordinary dating Terms of payment by a supplier which grants a cash discount if a bill is paid within a certain number of days.