TRADE DISCOUNTS || BUSINESS MATHEMATICS

Summary

This video tutorial explains the concept of trade discounts, types of discounts, and how to calculate them. Viewers will learn about single and multiple discounts, including examples such as a 15% discount on a product and how to calculate the net invoice price. The video also covers how to compute the discount rate and invoice price using formulas. Key topics include understanding list price, discount amounts, and net invoice price rate, all with clear examples to guide learners through the process of applying and calculating trade discounts in real-world scenarios.

Takeaways

• 😀 Trade discounts are reductions in the price granted to buyers, typically wholesalers, when purchasing products.
• 😀 Single discount refers to a discount given based on a specific condition, like a percentage off the list price.
• 😀 Common examples of trade discounts include discounts for senior citizens, fully vaccinated individuals, or based on specific conditions such as online shopping promotions.
• 😀 The formula to compute the discount amount is: List Price × Discount Rate.
• 😀 The net invoice price is calculated by subtracting the discount amount from the list price (List Price - Discount Amount).
• 😀 In the first example, a 15% discount on an item priced at 1,250 pesos results in a discount amount of 187.50 pesos, leading to a net invoice price of 1,062.50 pesos.
• 😀 Another method to compute the net invoice price is using the net invoice price rate, which is calculated by subtracting the discount rate from 100%. For example, a 15% discount results in an 85% net invoice price rate.
• 😀 When the discount amount is given, you can calculate the discount rate by dividing the discount amount by the list price and converting it into a percentage.
• 😀 In the second example, a living room set priced at 5,300 pesos with a 636 pesos discount leads to a discount rate of 12%, and the net invoice price is 4,664 pesos.
• 😀 For multiple discounts, like a 10% and 5% discount on an item priced at 1,250 pesos, you compute each discount sequentially and subtract the total discount from the list price to get the net invoice price. In this case, the net invoice price after both discounts is 1,068.75 pesos.

Q & A

What is a trade discount?

A trade discount is a reduction in the list price of a product, usually granted to buyers such as wholesalers or retailers. It is offered as an incentive for purchasing in bulk or under specific conditions.

What is the difference between a single discount and a series discount?

A single discount is a one-time reduction applied to the list price, while a series discount involves applying multiple discounts one after the other, reducing the price incrementally with each discount.

How do you compute a single discount?

To compute a single discount, multiply the list price by the discount rate (in decimal form). Then subtract the resulting discount amount from the list price to find the net invoice price.

What is the formula for calculating the discount amount?

The formula for calculating the discount amount is: Discount Amount = List Price × Discount Rate.

How do you find the net invoice price?

The net invoice price is calculated by subtracting the discount amount from the list price: Net Invoice Price = List Price - Discount Amount.

If a product costs 1,250 pesos and is given a 15% discount, what is the net invoice price?

The discount amount is 1,250 × 0.15 = 187.50 pesos. Subtracting this from the list price, the net invoice price is 1,250 - 187.50 = 1,062.50 pesos.

How do you calculate the discount rate when the discount amount is given?

To calculate the discount rate when the discount amount is known, divide the discount amount by the list price and then convert the result into a percentage. Formula: Discount Rate = (Discount Amount / List Price) × 100.

What is the formula to calculate the net invoice price rate?

The formula to calculate the net invoice price rate is: Net Invoice Price Rate = 100% - Discount Rate. Then multiply the list price by the net invoice price rate to find the final price after discount.

How do you calculate the total discount when two discounts are applied sequentially?

To calculate the total discount when two discounts are applied, first calculate the discount for each rate separately. Then add the two discount amounts together to get the total discount.

How do you convert a percentage discount into decimal form for calculations?

To convert a percentage discount into decimal form, divide the percentage by 100. For example, a 15% discount becomes 0.15 in decimal form.