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CH08 PPT
CH08 PPT
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Key Terms
Suggested retail price, catalog price, list
price: three common terms for the price which
the manufacturer suggests an item be sold to
the consumer.
Trade discount: the amount of discount that
the wholesaler or retailer receives off the list
price or the difference between the list price and
the net price
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Key Terms
Net price: the price the manufacturer or
retailer pays or the list price minus the
trade discount.
Discount rate: a percent of the list price.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Product flow
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Price flow
30% 50%
off list off list
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
How to find the trade discount
Using a single trade discount rate:
1. Identify the single discount rate and the
list price.
2. Multiply the list price by the single
discount rate.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Look at this example
Trade discount = rate x list price
Find the trade discount for a cd player that
retails at $120 and has a trade discount rate of
35%.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Try these examples
Find the trade discount for a rug that lists
for $290 and has a trade discount of 30%.
$87
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Find the net price
Using the trade discount:
1. Identify the list price and the trade discount.
2. Subtract the trade discount from the list
price.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Look at this example
Find the net price of a desk that lists for
$320 and has a trade discount of 30%.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Try these examples
Find the net price of a camera that lists for
$240 and has a trade discount of 45%.
$132
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Find the net price
Using the complement of the single trade
discount rate.
Complement of percent: the difference
between 100% and the given percent.
Examples:
The complement of 30% is 70%.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
How to find the net price
1. Find the complement: subtract the single trade
discount from 100%.
2. Multiply the list price by the complement of the
single trade discount.
Example:
Find the net price of a coffee maker that lists
for $20 and has a trade discount rate of 20%.
80% is the complement of 20%
NP = $20 x 0.80 = $16
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Try these examples
Find the net price of a set of golf clubs that
lists for $1,500 and has a trade discount of
15%.
$1275
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
8.2 Trade Discount Series
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Trade discount series
Trade discount series or chain discount:
additional discounts that are deducted one after
another from the list price.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Trade discount series step by step
An item lists for $400 and has a discount of
20%. $400 x 0.2 = $80; $400 - $80 = $320
An additional discount of 10% is taken on the
previous price.
$320 x 0.1 = $32; $320 - $32 = $288
An additional discount of 5% is taken on the
previous price.
$288 x 0.05 = $14.40; $288 - $14.40 = $273.60
$273.60 is the final price
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Can you add the discounts
together and apply it as one?
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
The net decimal equivalent
To find the net decimal equivalent of a
trade discount series:
1. Find the net decimal equivalent: multiply
the decimal form of the complement of
each trade discount rate in a series.
2. Multiply the list price by the net decimal
equivalent.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Look at this example
Find the net price of an order with a list price of
$800 and a trade discount series of 20/10/5.
Find the complement of each of the trade
discount rates.
They are 0.80, 0.90 and 0.95.
Multiply them together.
The net decimal equivalent is 0.684
Apply the net decimal equivalent to the list
price.
NP = 0.684 x $800 = $547.20
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Try these examples
A tool set lists for $325 and has a trade
discount series of 20/10/10. Find the net
price.
$210.60
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
8.2.2 Find the Trade Discount
To find the trade discount by applying a trade
discount series and using the single discount
equivalent:
1. Find the single discount equivalent by
subtracting the net decimal equivalent from “1.”
2. Multiply the list price by the single discount
equivalent.
TD = single discount equivalent x list price
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Key Terms
Single discount equivalent: the
complement of the net decimal equivalent.
It is the decimal equivalent of a single
discount rate that is equal to the series of
discount rates.
Total amount of a series of discounts =
single discount equivalent x list price
Net amount you pay = net decimal
equivalent x list price
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Look at this example
Use the single discount equivalent to
calculate the trade discount on a $3,200
lawn tractor with a discount series of
30/20/10.
Find the net decimal equivalent by
multiplying the complements of each
discount rate. 0.70 x 0.80 x 0.90 = 0.504
To find the single discount equivalent,
subtract the net decimal equivalent from “1.”
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Look at this example (continued)
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
8.3 Cash Discount and
Sales Terms
Find the cash discount and the net amount
using ordinary dating terms
Interpret and apply EOM terms
Interpret and apply ROG terms
Find the amount credited and the
outstanding balance from partial payments
Interpret freight terms
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
8.3.1 Find the Cash Discount
and the Net Amount
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Look at this example
Find the cash discount for an invoice dated
December 1 for $1,500 with terms of 2/10
n/30.
If the invoice is paid on December 9th, for
example, the payment would include the
discount and the amount would be $1,470.
If the invoice is paid on or after December
11th, the amount to pay would be $1,500.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Try these examples
Annie’s Plants has received an invoice for
$450.00 for potting soil dated November 3 with
terms of 5/10 n/30. If the invoice is paid on
November 12, how much would Annie’s pay?
$427.50
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
“Thirty days has September…”
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Use the complement to find the
net amount of an invoice
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Try this example
Sycamore Enterprises received a $1,248 bill for
computer supplies dated September 2 with sales terms
of 2/10, 1/15, n/30. A 5% penalty is charged after 30
days. Find the amount due for the following dates:
September 12, September 15, October 1, October 3.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
8.3.2 Interpret and Apply
EOM (end-of-month) Terms
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
An EOM exception!
An exception occurs when the invoice is
dated on or after the 26th of the month.
The discount would be applicable until the
specified day of the month following the
month of the invoice.
Example: An invoice dated April 27 with
terms of 3/10 EOM would be eligible for the
discount if the bill is paid on or before June
10.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
8.3.3 Apply Receipt of Goods
(ROG) Terms
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
8.3.4 Find the Amount Credited
and the Outstanding Balance
Partial payment: a payment that does not
equal the full amount of the invoice less any
cash discount.
Partial discount: a cash discount applied only
to the amount of the partial payment.
Amount credited: the sum of the partial
payment and the partial discount.
Outstanding balance: the invoice amount
minus the amount credited.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Applying the percentage formula
In applying the percentage formula to find the
amount credited, the rate is the complement
of the discount rate; the percentage is the
partial payment; and the amount credited is
the base.
B = P/R
Sometimes a customer cannot pay the entire
amount of an invoice, but takes advantage of a
discount period to apply that discount to a part
of the total due.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Look at this example
If the Semmes Corporation received a $875 invoice with
terms of 3/10 n/30 and could not pay the full amount
within 10 days, but chose to send in a $500 partial
payment on Day 5, what amount was credited to their
account?
B (amount credited) = P (partial payment) divided by R
(complement of the discount rate)
B = 500/0.97= $515.46 = amount credited
The balance would be the difference.
$875 - $515.46 = $359.54 = balance
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
8.3.5 Interpret Freight Terms
Bill of lading: shipping document that includes
a description of the merchandise, the number of
pieces, weight, name of the consignee (sender),
destination, and method of payment of freight
charges.
FOB shipping point: “free on board” buyer
pays for shipping when shipment is received.
Freight collect: The buyer pays the shipping
when the shipping is received.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
More key terms
FOB destination: “free on board” at the
destination point. The seller pays the shipping
when the merchandise is shipped.
Freight paid: The seller pays the shipping
when the merchandise is shipped.
Prepay and add: The seller pays the shipping
when the merchandise is shipped; but, the
shipping costs are added to the invoice for the
buyer to pay.
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved
Remember that cash discounts
do not apply to shipping costs
Business Math, Eighth Edition © 2009 Pearson Education, Inc. Upper Saddle River, NJ
Cleaves/Hobbs 07458 All Rights Reserved