MATHEMATICS OF

BUYING

Midterms
LEARNING COMPETENCIES:
After studying this section, the learner is expected to:
1. Be familiar with an invoice.
2. Understand common shipping terms.
3. Calculate trade discounts and understand why they
are given
4. Differentiate between single and series discounts,
5. Calculate each series discounts separately.
6. Use complements to calculate series discounts.
 Retail businesses make a profit by purchasing
items and then selling them for more than they
cost. There are several steps in this process:
manufacturers buy raw materials and component
parts and assemble them into products that can
be sold to other manufacturers or wholesalers.
The wholesalers, often called ‘’middleman’’, buys
from manufacturers or other wholesalers and sells
to the retailer. Retailers sell directly to the
ultimate user, the consumer.
 Invoices help businesses keep track of sales,
while various types of discounts help them buy
products at lower costs so that they can increase
profits.
Electronic Commerce has enabled businesses
to replace much of their paper-based business
processes with electronic solutions.
 An invoice is a printed record of
purchase and sale. For the seller it is a
sales invoice and records a sale; for the
buyer it is a purchase invoice and
records a purchase.
Understand Common Shipping Terms

The shipping term FOB (free on board),

followed by the words shipping point or
destination, commonly appears on invoices. The
term FOB shipping point means that the buyer
pays for shipping and that ownership of the
merchandise passes to the purchaser prior to
shipment. The term FOB destination means that
the seller pays the shipping charges and retains
ownership until the goods reach the destination.
 The shipping term COD means cash on
delivery. When goods are sent COD, the
shipper delivers to the purchaser on receipt of
enough cash to pay for the goods. When
goods are moved over water, the shipping
term FAS, which means free alongside ship, is
common.
Calculate Trade Discounts and Understand
Why They Are Given
Trade discounts are often given to businesses or
individuals who buy an item for resale or produce an
item that will then be sold. The seller usually gives the
price of an item as its list price (the suggested price at
which the item can be sold to the public). Then the
sellers gives a trade discount that is subtracted from
the list price. The result is the net cost or net price
(the amount paid by the buyer).
Formula in getting the Net Cost

Net Cost = List Price – Trade Discount

or

List Price
-
Trade Discount
Net Cost
Formula in getting the Trade Discount

List Price x Rate = Trade Discount

Example 1
Find the amount of the trade discounts by
finding 25% of P9,980.
List Price x Rate = Trade Discount
P9,980 x 25% = P9,980 x .25 = P2,495
Subtract P2,495 from the list price of P9,980

P9,980 List Price

-
2,495
______ Trade Discount

P7,485 Net Cost

Example 2
What is the trade discount if the rate was 15%
and the list price is P5,500.
List Price x Rate = Trade Discount
P5,500 x 15% = P5,500 x .15 = P825
Subtract P825 from the list price of P5,500
P5,500 List Price
-
825
______ Trade Discount

P4,675 Net Cost

Why Trade Discounts Change
• Price changes may cause trade discounts to be raise or
lowered.
• As the quantity purchased increases, the discount
offered may increase.
• Geographic location may influence the trade discount.
An additional discount may be offered to increase sales
in a particular area.
• Seasonal fluctuations in sales may influence the trade
discounts offered.
• Competition from other companies may cause the
raising or lowering of trade discounts.
 Different methods can be used to calculate a series discount
and net cost. The first of these is by calculating discounts
separately.
Example 1:
Kitchen Picks is offered a series discount of 20/10 on a griller
with a list price of P1,500. Find the net cost after the series
discount.
Solution:
P1,500 List Price Discount: 20/10
- ______
300 (.20 x 1,500)
P1,200
- ______
120 (.1 x 1,200)
P1,080 Net Cost
Example 2:
The list price for a winter coat is P6,800. A series
discount of 15/5 is being offered for any orders. Find the
net cost.
Solution:
P6,800 List Price Discount: 15/5
- 1,020 (.15 x 6,800)
______
P5,780
- ______
289 (.05 x 5,780)
P5,491 Net Cost
 By this second method of finding the net cost, first find the
complement ( with respect to 1, or 100%) of each of single
discount.

Discount Complement Decimal Complement

with respect to Equivalent of with Respect to 1
100% Discount
10% 90% .10 .90
15% 85% .15 .85
20% 80% .20 .80
25% 75% .25 .75
30% 70% .30 .70
35% 65% .35 .65
40% 60% .40 .60
50% 50% .5 .50
80% 20% .80 .20
Example:
Kitchen Picks is offered a series discount of 20/10 on a griller
with a list price of P1,500. Find the net cost after the series
discount.

Step 1. Series Discount 20 / 10

Step 2. Find complements with respect to 1 .80 .90

Step 3. Multiply the complements .80 x .90 = .72

net cost
equivalent
 P1,500 list price
x
.72
_______ net cost equivalent
P1,080 NET COST

Find the amount of the discount by subtracting the net cost

from the list price.

P1,500 list price

- ________
1,080 net cost
P420 amount of discount
Using complements to Solve Series Discounts
The list price of a combination gas and electric stove is P30,950. Find
the net cost after a series discount of 20/10/10.

Solution:
Start by finding the complements with respect to 1 of each discount

Series discount 20 / 10 / 10
Finds complements
with respect to 1 .8 .9 .9

Multiply the .8 x .9 x .9 = .648 net cost equivalent

complements
P30,950 list price
x .648 net cost equivalent
_______
P20,055.60 NET COST

Note: Never round off the net cost equivalent. Doing so will often result in
a net cost that is incorrect.
SINGLE DISCOUNTS
EQUIVALENTS
 Express a Series Discount as an Equivalent Single
Discount

Series or chain discounts must often be expressed as a

single discount rate. Find a single discount equivalent to a
series discount by multiplying the complements (with
respect to 1 or 100%) of the individual discounts. As in the
previous section, the result is the net cost equivalent.
Then subtract the net cost equivalent from 1 (1=100%).
The result is the single discount that is the equivalent to
the series discount. The single discount equivalent is
expressed to as percent.
Finding the Single Discount Equivalent
Single discount equivalent = 1 - net cost equivalent
Example:
If the Alger Energy Inc. offered a 20/10 discount to wholesale accounts on all heating,
ventilation and cooling systems, what would the single discount equivalent be?

Solution:
Series discount 20 / 10
Finds complements
with respect to 1 .8 .9

Multiply the .8 x .9 = .72 net cost equivalent

complements
1.00 base (100%)
- .72 net cost equivalent (remains)
____
.28 or 28% was discounted
The single discount equivalent of a 20/10 series discount is 28%.
 Find the Net Cost by Multiplying the List Price by the
Complements of the Single Discounts in a Series
Example:
The list price of an oak dinette set is P4,950. Find the net cost if
trade discounts of 20/15/5 are offered.
Solution:
Net Cost = List Price x Net Cost Equivalent

P4,950 LIST PRICE

x _______
.646 (.8 x .85 x .95)
P3,197.70 NET COST

The net cost of the oak dinette set is P3,197.70.

Find the List Price Given the Series Discount and the Net
Cost
Example:
Find the list price of a food processor that has a net cost of P2,432 after trade
discounts of 20/20.

Solution: Use a net cost equivalent. Start by finding the percent paid, using
complements.
Series discount 20 / 20
Finds complements
with respect to 1 .8 .8

Multiply the .8 x .8 = .64 net cost equivalent

complements

As the work shows, .64 or 64% of the list price was paid. Find the list price
with the standard percent formula.
 % of something is something
64% of list price = P2,432
Rate x Base = Portion
R x B = P

or
List Price =_____
Portion 2,432
______
=
Rate .64
= P3,800 List Price
or simply use this formula:
List Price = Net Cost / Net Cost Equivalent
Example:

Find the list price of a coffeemaker having a series discount of 10/30/20 and
a net cost of P1,134

Solution:

Series discount 10 / 30 / 20
Finds complements
with respect to 1 .9 .7 .8

Multiply the .9 x .7 .8 = .504 net cost equivalent

complements

Therefore, .504 of the list price is P1,134. Use the formula for base.

List Price =_______

Net Cost
= 1,134
______
= P2,250
NCE .504
End of Midterm