PowerPoint PresentationAfter completing this chapter, you will be able to: … the net price of an item after single or multiple trade discounts … a single discount rate that is equivalent to a series of multiple discounts … the amount of the cash discount for which a payment qualifies Calculate Learning Objectives LO 2. LO 1. LO 3. McGraw-Hill Ryerson© …the ordinary dating notation for the terms of payment of an invoice Understand Solve Middlemen Manufacturer Wholesaler Consumer Retailer Distributor Middlemen i.e. Formula Formula LO 1. McGraw-Hill Ryerson© Trade Discount The price of office equipment is $3000. The manufacturer offers a 30% trade discount. Find the net price and the trade discount amount. = 3000(1 – .3) McGraw-Hill Ryerson© Trade Discount An order for power tools has a $2100 net price after a 30% trade discount. What is the list price? L = This does not mean a TOTAL of 30% Discount! This refers to the giving of further discounts as incentives for more sales. Middlemen Distributor Note Wholesaler LO 2. Series Discounts McGraw-Hill Ryerson© The price of office furniture is $20000. The series discounts are 20%,10%, 5%. What is the net price? L = 20000(1-.2)(1-.10)(1-.05) = 20000(.8)(.9)(.95) McGraw-Hill Ryerson© Find the single discount rate that is equivalent to the series 15%, 10% and 5%. Apply the multiple discounts to a List price of $100 N = L(1 – d) 27.33% Step 1 Step 2 McGraw-Hill Ryerson© The price of car parts is $20,000. The series discounts are 20%, 8%, 2%. What is the single equivalent discount rate? = 100(.8)(.92)(.98) = $72.13 discount = Apply the multiple discounts to a List price of $100 Trade Discount Step 1 Step 2 McGraw-Hill Ryerson© A discount given for the prompt payment of an account. No Cash Discount Period for buyers to pay invoices Terms IF Not …then full amount payable in 30 days Therefore, discount can be claimed! Terms McGraw-Hill Ryerson© Partial Payments You owe $400. Your terms were 3/10, n/30. Within 10 days you sent in a payment of $100. How much is your new balance? Amount credited L = Amount paid /(1-d) - or - Selling Price Consumer Gross Profit X (or Margin/MarkUp) Less: Operating Expenses X Net Profit (Income) $ X Operating Expenses are the expenses the company incurs in operating the business, e.g. rent, wages and utilities The X Co. Inc $1200 Computer $900 $300 + $ MarkUp is The Portion McGraw-Hill Ryerson© You buy Sunday newspapers for $1.00. You plan to sell them for $1.50. (A) What is your $ markup? (B) …and your percent markup on cost? (A) Selling Price $1.50 you know Cost & Percent Mark Up on Cost Mark Up McGraw-Hill Ryerson© $ ? Mark Up ? Jane’s flower business sells floral arrangements for $35. To make her desired profit, Jane needs a 40% markup on cost. (A) What do the flower arrangements cost Jane? (B) What is the dollar markup? (A) Mark Up Selling Price McGraw-Hill Ryerson© You buy Sunday newspapers for $2.00. You plan to sell them for $2.50. (A) What is your $ markup? (B) …and your percent markup on Selling Price? (A) Selling Price McGraw-Hill Ryerson© Ray’s Appliances bought a sewing machine for $150. To make the desired profit, a 60% markup on Selling Price is needed. (A) What is the Selling price? (B) What is the $ markup? (A) ? Jane’s flower business sells floral arrangements for $35. To make her desired profit, Jane needs a 40% markup on Selling Price. (A) What do the flower arrangements cost Jane? (B) What is the dollar markup? (A) % Markup on Cost % Markup on Cost .33 Selling Price (original) Sears marked down a $50 tool set to $36. What is (a) the $markdown and (b) the %markdown? $Markdown = %Markdown = Markdown *S(R) ? ?