BUYING AND

SELLING

Chapter 3: Mathematics of Merchandising

Lesson 1 : Single Trade Discounts and Discount Series
 SUPPLY CHAIN
manufacturer distributor Wholesaler Retailer consumer
2 traditional Discount Method
Steps to compute Net Price with the Discount Method
methods for Step 1. Multiply the discount rate by the list price to get

computing the discount amount.

discount = trade discount rate (list price)

trade Step 2. subtract the discount from the list price to get the
net price.
discounts Net Price = List Price - Discount
EXAMPLE
Bakal Supply Merchandise sells a set of stainless steel
trays to Lara’s Cookies Shop. The list price is ₱3,500 and
Lara qualifies for a 30% trade discount. Compute the net
price.
2 traditional Complement Method
Steps to compute Net Price with the Complement Method
methods for Step 1. Subtract the discount rate from 100% to get the

computing complement rate.

complement rate = 100% - trade discount rate

trade Step 2. Multiply the complement rate by the list price to

get the net price.
discounts Net Price = complement (list price)
EXAMPLE
Bakal Supply Merchandise sells a set of stainless steel
trays to Lara’s Cookies Shop. The list price is ₱3,500 and
Lara qualifies for a 30% trade discount. Compute the net
price.
example 1. A manufacturer can cover its cost and make a
reasonable profit if it sells its product for ₱262.50. At what
price should the product be listed so that a discount of
30% can be allowed?

•We  used the following formula.

net price = complement rate × List price
₱262.50 = 0.70 × list price
list price =
list price = ₱375
The product should be listed at ₱375.00
example 2. A bicycle is listed in a wholesaler’s catalog at ₱5,450.
The bicycle is sold to a retailer for a net price of ₱4,087.50.
What rate of trade discount was given?

•We  used the following formula.

discount = trade discount × List price
First, we compute the discount.
discount = ₱5,450 - ₱4,087.50 = ₱1,362.50
Hence,
₱1,362.50 = trade discount × ₱5,450
trade discount =
trade discount = 0.25
A 25% trade discount was given to the wholesaler.
 Series of It is where a distributor or manufacturer may give a

discount or trade discount that has two or more discounts.

Discount
series To find the net price, the first discount is based on the
list price. The second discount is based on the remainder
after deducting the first discount. The third discount is
based on the remainder after deducting the second
discount, and so on. Both the discount method and
complement method can be used to compute the net
price for a series of discount.
example 1. Plato Marketing sells a particular kind of plate with a list
price of ₱200. Giok’s Fast-food qualifies for the series of
discounts: 25%, 20%, 10%. Compute the net price using
the discount method.

We will used the discount method to compute the net price.

First discount Second discount Third discount

Step 1 0.25 × ₱ 200 = ₱50 0.20 × ₱ 150 = ₱30 0.10 × ₱ 120 = ₱12

Step 2 ₱200 - ₱50 = ₱150 ₱150 - ₱30 = ₱120 ₱120 - ₱12 = ₱108
example 1. Plato Marketing sells a particular kind of plate with a list
price of ₱200. Giok’s Fast-food qualifies for the series of
discounts: 25%, 20%, 10%. Compute the net price using
the complement method.

We will used the complement method to compute the net price.

First discount Second discount Third discount

Step 1 100% - 25% = 75% 100% - 20% = 80% 100% - 10% = 90%

Step 2 0.75 × ₱200 = ₱150 0.80 × ₱150 = ₱120 0.90 × ₱120 = ₱108
example 1. Plato Marketing sells a particular kind of plate with a list
price of ₱200. Giok’s Fast-food qualifies for the series of
discounts: 25%, 20%, 10%. Compute the net price using
the shortcut method.

The list price is ₱200, and the discounts are 25%, 20%, and
10%. The complement rates are 75%, 80%, and 90%. Hence,
net price = ₱200 × 0.75 × 0.80 × 0.90 = ₱108
example 2. A retail kiosk has listed a mobile phone case for ₱136 less
30%. A department store in the shopping mall list the same
case for ₱126 less 20%, less an additional 15%. What
additional rate of discount must the kiosk give to meet the
department store price?

•Using
  the complement method, we have:
Kiosk net price = 0.70 × ₱136 = ₱95.20
The shortcut gives us;
department store price= ₱126 × 0.80 × 0.85 = ₱85.68
The difference between the retail Kiosk net price and the
department store price is ₱9.52. Hence,
additional rate of discount needed =