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## Trade Discounts

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**SECTION**15-1 Trade Discounts**Key Words to Know**list price The price at which a business generally sells an item, also called the catalog price. trade discount A discount off the list price of an item.**Key Words to Know**trade-discount rate The amount of the discount of an item expressed as a percent of the list price. net price The price actually paid for a discounted item.**Formulas**Trade Discount = List Price × Trade-Discount Rate Net Price = List Price – Trade Discount**Do Now**Johnson Auto Repair Shop is purchasing an electronic ignition module for a sport coupe that is six years old. The list price in the wholesaler’s catalogue is $845. Johnson receives a 40 percent trade discount. What is the net price of the module?**Answer: Step 1**Find the trade discount. List Price ×Trade-Discount Rate $845 × 40% = $338.00**Answer: Step 2**Find the net price. List Price – Trade Discount $845.00 – $338.00 = $507.00**SECTION**15-2 pp. 489-491 Trade Discount— Complement Method**Section Objective**Calculate: • net price using the complement method**Formula**Net Price = List Price × Complement of Trade-Discount Rate**Key Words to Know**complement method A way to find the net price of a discounted item by subtracting the discount rate from 100 percent.**Do Now**The list price of an electronic ignition module in the wholesaler’s catalog is $845. Repair shops receive a 40 percent trade discount. What is the net price of the module?**Answer: Step 1**Find the complement of trade-discount rate. 100% – 40% = 60%**Example 1 Answer: Step 2**Find the net price. List Price × Complement of Trade-Discount Rate $845.00 × 60% = $507**Formula #2**Net Price = List Price × Percent Price**Do Now**Shelita Reeves runs Affiliated Lumber and buys paint from Dap Corporation. Dap grants a 40 percent trade-discount rate to all retail outlets. How much does Reeves pay for a case of white ceiling paint if it retails for $132.**Example 2 Answer**Step: Find the net price List Price = List Price × Percent Price $132.00 × (100% − 40%) $132.00 × 60%= $79.20**SECTION**15-3 pp. 492-494 Trade-Discount Rate**Key Words to Know**trade-discountrate The amount of the discount of an item expressed as a percent of the list price.**Formulas**Trade Discount = List Price – Net Price Trade-Discount Rate = Trade Discount List Price**Do Now**Auto Parts Manufacturing Company shows a $156 list price in its catalog for a water pump. The net price to the retailer is $117. What is the trade-discount rate?**Answer: Step 1**Find the trade discount. List Price – Net Price $156 – $117 = $39**Example 1 Answer: Step 2**Find the trade-discount rate. Trade Discount ÷ $156 = 25%**SECTION**15-4 pp. 495-497 Chain Discounts**Section Objective**Determine: • final net price after a chain of discounts**Key Words to Know**chain discounts A series of trade discounts a supplier may offer to sell out a discontinued item or to encourage a customer to place a larger order.**Do Now**Lawn Corporation produces a lawn mower which is priced at $695. A new model is ready for production, so the old model will be discontinued. Lawn Corporation is offering a chain discount of 20 percent less 10 percent, also written as 20/10. What is the final net price of the lawn mower?**Answer: Step 1**Find the first discount. List Price ×Discount Rate $695.00 ×20% = $139.00**Answer: Step 2**Find the first net price. List Price – Discount $695.00 – $139.00 = $556.00**Answer: Step 3**Find the second discount. $556.00 ×10% = $55.60**Answer: Step 4**Find the final net price. $556.00 – $55.60 = $500.40**SECTION**15-5 Chain Discounts— Complement Method**Section Objective**Compute: • final net price using the complement method**Key Words to Know**net-price rate The percent of the price paid for an item, found by multiplying the complements of the chain discounts.**Formula**Net Price Rate = Product of Complements of Chain-Discount Rates Net Price = List Price × Net-Price Rate**Do Now**Dell’s manufactures a riding mower, which is priced at $1,450. A new model is ready for production, so the model will be discontinued. Dell’s is offering a chain discount of 25 percent less 20 percent less 10 percent. What is the net price for the mower?**Answer: Step 1**Find the complements. Complement of 25 percent: 100% – 25% = 75% Complement of 20 percent: 100% – 20% = 80% Complement of 10 percent: 100% – 10% = 90%**Answer: Step 2**Find the net-price rate. Product of Complements of Chain-Discount Rates 75% × 80% × 90%= $54%**Answer: Step 3**Find the net price. List Price ×Net-Price Rate $1,450 ×54% = $783**Key Words to Know**single equivalent discount (SED) (p. 499) One discount that is equal to a chain discount.**Formula**SED = Complement of Net-Price Rate Discount = List Price × SED**Example 2**In Example 1 the chain discount complements were 75 percent/80 percent/90 percent and the net-price rate was 54 percent. What is the SED? What is the discount?**SECTION**15-6 pp. 502-504 Cash Discounts— Ordinary Dating**Section Objective**Compute: • cash price when the discount is based on ordinary dating**Key Words to Know**invoice A bill listing the quantities and costs of items purchased. cash discount A discount a supplier grants if a bill is paid within a certain number of days.**Key Words to Know**ordinary dating Terms of payment by a supplier which grants a cash discount if a bill is paid within a certain number of days.