1. Section 27.2 Calculating Discounts
Marketing Essentials
n Chapter 27 Pricing Math
Section Calculating Discounts

2. Calculating Discounts
SECTION 27.2
Calculating Discounts
What You'll Learn
The general procedure for figuring discounts
How to calculate various kinds of discounts

3. Calculating Discounts
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.

4. Calculating Discounts
SECTION 27.2
Calculating Discounts
Key Terms
employee discounts

5. Calculating Discounts
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

6. Calculating Discounts
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.

7. Calculating Discounts
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

8. Calculating Discounts
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

9. Calculating Discounts
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

10. Calculating Discounts
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

11. Calculating Discounts
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

12. Calculating Discounts
SECTION 27.2
Calculating Discounts
Quantity Discount
Using a quantity price list:
No. of items
Unit price $ $ $.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

13. Calculating Discounts
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(%)

14. Calculating Discounts
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

15. Reviewing Key Terms and Concepts
ASSESSMENT
27.2
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?

16. ASSESSMENT Thinking Critically 27.2
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.

17. Promotional Discounts
27.2
Graphic Organizer
Discounts from Manufacturers and Distributors
Discounts from
Manufacturers and Distributors
Cash Discounts
Trade Discounts
Quantity Discounts
Promotional Discounts
Seasonal Discounts

18. Marketing Essentials
End of Section 27.2