Business Mathematics

Quarter 1: Week 6
SENIOR HIGH SCHOOL

What I Need to Know

As we learn and engage ourselves in “Business Mathematics” it is necessary to
know the concepts on margin, trade discount and discount series.
After going through module, you will be able to :
1. differentiate Mark-up from margins
2. describe how gross margins is used in sales
3. compute single trade discounts and discount series

What I Know

A. Fill in the blanks.

Instructions: Identify the following terms. Choose the answers from the box.

Margin Trade discount

Mark up discount Series

__________1. The amount by which the retail price of a product is reduced by the manufacturer
when it is sold to the reseller or customer.
__________2. The difference between selling and the seller’s costs for the goods or services on
sale, expressed as a percentage of selling price.
__________3. Refers to a discount that you offer based on a number of different conditions..
__________4. The increase in selling price from the original cost.
B. Answer the following problems.

1. How much is the trade discount of an item with a list price of Php1250.00 subject to a
15% discount?
a) Php197.50 b) Php187.50 c) Php177.50 d) Php167.50
2. What is the sale price in problem number 2?
a) Php1,602.50 b) Php1,206.50 c) Php1,062.50 d) Php1,162.50
3. The cost of a pair of shoes is P950.00, it is sold at 25% markup based on cost. What is
its gross margin?
a) PHp237.50 b) Php1,167.50 c) Php1,178.50 d) Php1,187.50

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 What’s In

Garage sales are a great way to make a profit. You plan for your sale, decide what
items you are going to sell, then price them and give each item a discount.
In determining the gross margin, you have to know the sales and deduct the cost of the
product.

What’s New
BARGAIN HUNTING
The following items are on sale. Match the item in column A to the sale price in
column B. Write the letter of your choice.

COLUMN A COLUMN B

Php400 SALE 75 % OFF A. Php1,080

Php1000

SALE
20% OFF B. Php1,125

Php840
SALE 50% OFF C. Php100

Php1200

SALE D. Php420
10% OFF

Php1500

SALE
25% OFF E. Php800

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 What is it

DIFFERENCE BETWEEN MARKUP AND MARGIN

MARGIN (GROSS MARGIN) refers as sales minus the cost of goods sold.

Illustration:
If a profit sells for ₱200.00 and costs ₱140.00 to manufacture, its gross margin is
₱60.00. Stated as a percent, the margin is 30% (calculated as the margin divided by sales).
This is the markup based on sales or selling price.

MARGIN (MARKUP BASED ON SELLING PRICE)- is expressing the cost and the markup in
percent, wherein selling price is used as the base. Here are the formula:

P
R=
B
Cost
Cost as %  of selling price=
Selling price

Markup
Markup as %  of selling price=
Selling price
Let’s Try:
Cost ………………….. ₱300 (______)
Markup ……………… ₱150 (______)
Selling Price ………. ₱450 (______)

Answer:
Cost ………………….. ₱300 66.67%
Markup ……………… ₱150 33.33%
Selling Price ………. ₱450 100%

MARKUP is the amount of the cost of a product is increased in order to derived the selling
price.

Illustration:
To use the preceding example, a markup of ₱60.00 to the ₱140.00 cost yield the
₱200.00 selling price. Quantified as percentage, the markup percentage is 42.86% (calculated
as the mark-up amount divided by the product cost). This is the markup based on cost.

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 FORMULA ON MARKUP BASED ON COST:
To express the selling price and the markup in percent, the cost is used as the base:
P
R=
B
Selling price
Selling price as % of cost=
Cost
Mark−up
Mark −up as % of cost=
Cost

Let’s Try:
Cost ………………….. ₱300 (______)
Markup ……………… ₱150 (______)
Selling Price ………. …₱450 (______)

Answer:
Cost …………………..₱300 100%
Markup ……………… ₱150 50%
Selling Price ………. ₱450 150%

Therefore, the markup addresses the profit as it relates to cost price while margin is
addressing the profit as it relates to selling price.

TRADE DISCOUNT it is a reduction from the list price granted to buyers. It could either
be a single discount or a series of discount.

Example 1:
Family Saver’s Supermarket places a Php3,500 worth of order for assorted brands of
chocolate. The chocolate wholesaler gave a 25% discount. How much is the trade discount?
Solution:
Original Price: Php3,500
Discount Rate: 25%
Trade Discount = Original Price x Discount Rate
= Php3500.00 x 25%
= Php3500 x 0.25
= Php875.00
Example 2:
In a video store, a DVD that sells for Php375 is marked 10% off. What is the trade
discount? What is the sale price of the DVD?
Solution:
Original Price: Php375
Discount Rate: 10%
Trade Discount = Original Price x Discount Rate
= 375 x 10%
= 375 x 0.10
= Php37.50
Sale Price of the DVD = Original Price – Trade Discount
= 375 – 37.50
= Php337.50

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NET INVOICE PRICE the price of the good/service after the discount has been deducted.
Formulas:
Discount = List Price −Net
SINGLE DISCOUNT: Invoice Price
P = BR (B = list price, R = discount rate, P = discount) Net Invoice Price = List price -
Trade Discount = List Price × Discount Rate Discount
NIP Rate = 100% - Discount

Example:
Compute the discount for an item with a list price of ₱1,250.00 subject to a 15% discount. What is its
net invoice price?
answer: ₱1,062.50

SERIES OF DISCOUNT:
A seller grants additional discounts other than the discount ordinarily given by him/her.

Example:
Compute the discount and the net invoice price if an item at ₱1,250.00 is given a 10% and 5%
discount.

SOLUTION FOR NIP:

NIP: (P1,250.00(90%)(95%))=P1,068.75
DISCOUNT: (P1250.00(10%),(5%))=P187.50

METHOD 1
1. The first discount rate must be multiplied by the list price.
2. Then, subtract the first discount from the list price.
3. To get the second discount, multiply the difference between the list price and the first discount,
and the second rate.
4. Then, deduct the second discount from the said difference to get the invoice price.
Formula of Discount = First Discount + Second Discount
METHOD 2
1. Multiply the list price by the rate obtained and deduct the first discount rate from 100%.
2. Multiply the first balance obtained by the second rate obtained and deduct the second discount
rate from 100%.
Formula of Discount = List Price – Net Invoice Price

METHOD 3
1. Deduct the series of discounts individually from 100%.
2. Multiply the resulting products by themselves to give us the net invoice rate.
3. Deduct the NIP rate from 100% to get the single equivalent discount rate.
4. Discount = List Price x Single equivalent discount rate
5. Net invoice price = list price x NIP rate
6. Net invoice price = List price – Discount

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What’s More

Complete the table.

ORIGINAL PRICE TRADE DISCOUNT DISCOUNT RATE DISCOUNTED PRICE

Php 6,500.00 Php1,200.00 (1) (2)
(3) Php500.00 10% (4)
(5) Php2,100.00 (6) Php5,600.00
Php27,800.00 (7) 35% (8)

What I Have Learned

Manufacturers, suppliers, vendors and businesses often increase their goodwill in

the business environment through the use of trade credit. Goodwill is the value or attractive
force a company generates with its customers by offering low prices, good customer service,
or high quality goods or services in the economic marketplace. Trade discounts can also
help improve goodwill if companies offer bigger discounts to businesses or individuals, giving
repeat business to the supplier or vendor.

Remember this triangle:

TD

OP R

Let :
TD = Trade Discount
OP = Original Price
R = Rate

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 Compute the following: Show your solution.

1. How much is the selling price of a double – burner gas stove listed at Php2,650.00 if a
discount of 15% is given to the customer?

2. An item listed at Php4,400.00 is subject to a trade discount of 25%. Find:

a. The amount of discount

b. The net price

3. A tennis racket amounts to Php2,900.00 at 30% discount. Find:

a. The list price

b. The net price

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