Transcript Section 27.2

Marketing Essentials
n Chapter 27 Pricing Math
Section 27.2 Calculating Discounts
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SECTION 27.2
Calculating Discounts
What You'll Learn
 The general procedure for figuring discounts
 How to calculate various kinds of discounts
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SECTION 27.2
Calculating Discounts
Why It's Important
Discounts affect the final price a customer
will pay. Therefore, it is essential that you
learn how to calculate discounts and the
net price payable.
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SECTION 27.2
Calculating Discounts
Key Terms
 employee discounts
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SECTION 27.2
Calculating Discounts
Discounts
A discount is a reduction in the price of goods and
services sold to customers. Calculating discounts
involves two steps:
Multiply the price (P) by the discount percentage
[D(%)] to get the dollar amount of the discount [D($)]:
P X D(%) = D($)
Subtract the discount from the price to get the net
price (NP), or the amount that the customer will
actually pay:
P – D($) = NP
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SECTION 27.2
Calculating Discounts
Employee Discounts
Businesses offer employee discounts to
encourage workers to buy the products they
sell or manufacture. Employees who buy and
use their company's products project
confidence in and enthusiasm about them.
Employee discounts can range from 10 to 30
percent for entry-level employees and as high
as 50 percent for top-level executives.
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SECTION 27.2
Calculating Discounts
Discounts from Manufacturers
and Distributors
Some common types of discounts offered by
manufacturers and distributors are:
 cash
 trade
 quantity
 seasonal
 promotional discounts
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SECTION 27.2
Calculating Discounts
Cash Discounts
A cash discount is a discount offered to buyers
to encourage them to pay their bills quickly.
With the invoice terms 3/15, net 60, the first
number (3) represents the percentage of the
discount applicable to the invoice total (P).
Slide 1 of 2
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SECTION 27.2
Calculating Discounts
Cash Discounts
To calculate the cash discount:
 Determine the dollar discount:
P x D(%) = D($)
 Determine the net price:
P - D($) = NP
To determine a cash discount on a unit price, do
the same calculation, with P equaling the unit price.
Slide 2 of 2
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SECTION 27.2
Calculating Discounts
Trade Discounts
Trade discounts are based on manufacturers'
list prices. They are calculated in the same
way as cash discounts:
 Determine the dollar discount:
P x D(%) = D($)
 Determine the net price:
P - D ($) = NP
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SECTION 27.2
Calculating Discounts
Quantity Discount
Quantity discounts are offered to buyers for
placing large orders. Quantity discounts may
be quoted as either a percentage of price or
as part of a quantity price list.
Slide 1 of 2
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SECTION 27.2
Calculating Discounts
Quantity Discount
Using a quantity price list:
No. of items
1-24
25-48 49-72
Unit price
$.95
$.90
$.85
If you purchased 50 items, you would pay $.85
each. Your total bill would be $42.50 ($.85 X 50).
A cumulative discount is quoted as a percentage
and is calculated like a cash discount.
Slide 2 of 2
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SECTION 27.2
Calculating Discounts
Promotional Discounts
Promotional discounts are given to businesses that
agree to advertise or promote a manufacturer's
products. When the promotional discount is quoted
as a percentage, it is calculated the same way
as a cash discount. If a dollar discount is given,
calculate the discount percentage this way:
 Divide the dollar discount by the original
price of the order:
D($) / P = D(%)
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SECTION 27.2
Calculating Discounts
Seasonal Discounts
Sellers offer seasonal discounts to encourage
buyers to purchase goods long before the
actual consumer buying season. To calculate
the net price with a seasonal discount offered
as a percent:
 Determine the dollar discount:
P x D(%) = D($)
 Determine the net price:
P - D($) = NP
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27.2 ASSESSMENT
Reviewing Key Terms and Concepts
1. What procedures are used to calculate
the dollar amount of a discount and the
final selling price?
2. Carlo's Ice Cream Specialties gives all
of its employees a 15 percent discount
on ice cream cakes. What would an
employee pay for a chocolate ice cream
cake that is $13.75?
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27.2 ASSESSMENT
Thinking Critically
Assume you are given a trade discount of
30 percent and a seasonal discount of 10
percent. You also take advantage of a cash
discount of 2 percent. Would you be
entitled to a 42 percent discount? Explain.
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27.2 Graphic Organizer
Discounts from Manufacturers
and Distributors
Discounts from
Manufacturers and Distributors
Cash
Discounts
Trade
Discounts
Promotional
Discounts
Quantity
Discounts
Seasonal
Discounts
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Marketing Essentials
End of Section 27.2
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