SENIOR HIGH SCHOOL

Business Mathematics
Quarter 1 Module 4
(Week 6)
Margin and Discounts

i
About the Module

This module was designed and written with you in mind. It is here to help you
master about conversion of fractions, decimal and percent or vice versa. The scope of
this module permits it to be used in many different learning situations. The language
used recognizes the diverse vocabulary levels of students. The lessons are arranged to
follow on the standard sequence of the course. But the order in which you read them
can be changed to correspond with the textbook you are now using. The module
contains two lessons namely;

Lesson 1: Gross Margin

Lesson 2: Single and Trade Discounts

After going through this module, you are expected to:

• differentiate mark-up from margins;

• describe how margin is used in sales; and
• compute single trade discounts and discount series.

ii
 What I Know (Pretest)

Directions: Read each item carefully. Answer what is being asked. Write the letter of
the correct answer on a separate sheet of paper.

1. An amount added to the cost of goods to obtain the selling price.

A. Margin C. Markon
B. Markdown D. Markup
2. It is computed by dividing the Gross Profit by the selling price.
A. Gross Margin C. Markon Rate
B. Markdown Rate D. Markup Rate
3. It is defined as the company's net sales revenue minus its cost of goods sold.
A. Discount Series C. Gross Profit
B. Gross Margin D. Trade Discount
4. It refers to the percentage of revenue that exceeds a company's costs of goods sold.
A. Discount Series C. Gross Profit
B. Gross Margin D. Trade Discount
5. It is the total amount of money acquired from sales during a specific period.
A. Cost of Goods Sold C. Gross Profit
B. Gross Margin D. Net Sales
6. A cost directed to produce a product.
A. Cost of Goods Sold C. Gross Profit
B. Gross Margin D. Net Sales
7. A one-time reduction in price is given to a client’s when a specific condition on their
buying method is met.
A. Gross Margin C. Single Trade Discount
B. Gross Profit D. Trade Discount Series

For item numbers 8 to 12, use the problem below:

RTY Manufacturing Co. sells glass cabinets. The profit for the last 3 years is presented
in the table below.

2014 2015 2016

Net Sales ₱ 69, 750.00 ₱ 81, 275.00
Cost of Good Sales ₱ 43, 500.00 ₱ 45, 625.00 ₱ 46, 530.00
Gross Profit ₱ 30, 900.00 ₱ 34, 745.00
Gross Margin

1
8. What is the Gross Profit in 2014?
A. ₱ 26, 250.00 C. ₱ 113, 250.00
B. ₱ 69, 750.00 D. ₱ 3, 034,125.00

9. What is the Gross Margin in 2014?

A. 0.58% C. 1.48%
B. 0.68% D. 37.63%
10. Compute for the Net Sales in 2015.
A. ₱ 14, 725.00 C. ₱ 45, 625.00
B. ₱ 30, 900.00 D. ₱ 76, 525.00
11. What is the Gross Margin in 2015?
A. 0.40% C. 1.48%
B. 0.68% D. 40.38%
12. What is the Gross Margin in 2016?
A. 0.57% C. 1.34%
B. 0.75 % D. 42.75%
13. Find the net price of a cellphone that is listed at ₱ 8,999.00 and has a trade discount
of 10%.
A. ₱ 899.90 C. ₱ 9,998.88
B. ₱ 8, 099.10 D. ₱ 89, 990.00

For item numbers 14 and 15, use the problem below:

An appliance store offers a trade discount series of 15%/10%/5% for a

refrigerator listed for a price of ₱ 11,500.00.

14. What is the discounted price of a refrigerator?

A. ₱ 3, 450.00 C. ₱ 8, 357.63
B. ₱ 8, 050.00 D. ₱ 11, 470.00
15. What is the equivalent single rate discount for the discount series?
A. 0.35% C. 27.33%
B. 35.00% D. 72.30%

2
Lesson Gross Margin
1

What I Need to Know

At the end of this lesson, you are expected to:

• differentiate mark-up from margins; and
• describe how margin is used in sales.

What’s In

Figure 1
Total Business Costs Formula

3
 What’s New

Figure 2
Reason for High & Low Gross Profit

What Is It

What is Gross Profit and Gross Profit Margin?

Gross Profit is defined as the company's net sales revenue minus its cost
of goods sold (COGS). It is the sales income a company gains after incurring the
direct costs used in producing the goods or the services it provides. The higher
the gross margin, the more capital a company holds.

Gross Profit Margin or Gross Margin shows the percentage of revenue

that exceeds a company's costs of goods sold. It illustrates how well a
company is generating revenue from the costs involved in producing their
products and services. It is calculated dividing Gross Profit with net sales or
revenue.

(Cited from Hayes, 2020)

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What is the use of Gross Margin?

Companies use gross margin to evaluate how their production costs relate to their
revenues. It is also used by companies to ensure efficiency in the production of their
product. Also, this is also a means in comparing two companies of different market
capitalizations.

How to compute for Gross Profit and Gross Margin?

The formula for the gross profit is net sales less than the cost of goods sold. Gross
margin is frequently expressed as a percentage, called the gross profit margin or
gross margin.

The calculation is:

Gross Profit = Net sales - Cost of goods sold

𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡
Gross Margin = 𝑥 100%
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠

where:

Net sales

-is equivalent to revenue, or the total amount of money generated from

sales for the period.

Cost of goods sold or COGS

- are the direct costs associated with producing goods. COGS include
both direct labor costs, and any costs of materials used in producing or
manufacturing company's products.
- It is also called as "cost of sales."

Example 1.1: Let us consider the table below that shows the data of three convenient
stores in the community. Compute for the missing data.

CONVENIENCE STORE
Store 1 Store 2 Store 3
Net Sales ₱ 120, 000.00 3) ₱ 327, 500.00
Cost of Sales ₱ 127, 500.00 ₱ 202, 800.00 4)
Gross Profit 1) ₱ 57, 200.00 ₱ 58, 950.00
Gross Margin 2) 22% 5)

Solution:

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What is the difference between Margin and Markup?

The difference between margin and markup is that margin is sales minus the
cost of goods sold, while markup is the amount by which the cost of a product is
increased in order to derive the selling price .

What’s More

Activity 1.3: NOW IT’S YOUR TURN!

Instruction: Do what is being asked.
A. Read each statement carefully. Draw if the statement is true and
if the statement is false. Write your answer on a separate sheet of paper.

1. Margin means the same with Markup.

2. COGS refers to the direct costs of producing the goods sold by a company.
3. Margin is the amount by which the cost of a product is increased to derive the
selling price.
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4. Gross Profit equals sales minus the cost of a good.
5. Cost of goods refers to cost sales of a product.
6. Net sales is the cost incurred by the company in a specific period.
7. Gross Margin is usually presented in percentage form.
8. Gross Profit is the company’s total expenses gain after incurring all the cost in
producing the product.
9. Gross margin is useless to use to gauge how their production costs relate to their
revenues.
10. Gross margin refers to the amount added to cost price to determine the selling
price.
B. Complete the table and solve for the unknown.

Product 1 Product 2 Product 3

Sales Revenue ₱ 50 000.00 ₱ 65 000.00 4)
COGS 1) ₱ 35 000.00 ₱ 70 000.00
Gross Profit ₱ 15 200.00 3) ₱ 10 000.00
Gross Profit Margin 2) 46.15% 5)

What I Need to Remember

KEY POINTS:

• Gross profit describes a company's top line earnings; that is, its revenues less
the direct costs of goods sold.
• The gross profit margin then takes that figure and divides it by net sales to get
a handle on how much gross profit is generated on a percentage basis after
taking costs into account.
• Net sales refer to the total income of a company in a specific period.
• Cost of good sales refers to the direct cost used in producing the product.
• The formula to be used to compute for Gross margin and Gross Profit:

7
Lesson Single and Trade Discounts
2

What I Need to Know

At the end of this lesson, you are expected to:

• define single and trade discounts; and

• compute single trade discounts and discount series.

What’s In

Attracts new
customers

Encourage
Patronizers Benefits of Introduces
("Suki") Discounts New Products

Raise Sales
During Off
Seasons

Figure 3
Benefits of Discounts

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 What’s New

Figure 4
The Flow of Goods from Supplier to Consumer

Have you ever wondered on the process goods have been through before we
could buy them and acquire ownership on them?

Based on the picture above, we can say that a product before it can be acquired
by the owner, it passes to different categories.

Can you give the role of each category in the flow of goods before it reaches us,
the consumer/ shopper?

What Is It

Based on the picture above, shows the flow of goods to the consumer, there are
other people who are involved in bringing in the item. These are the middlemen who
also expect profit from the product. So, discounts may be given by the supplier so that
the selling price may not raise higher than the expected price by the consumer.

The following are discounts a consumer can acquire:

(cited from: Rey, 2016)

1. When you go to the market and buy meat from a regular vendor or “suki” (as we say
in Filipino), you are sometimes given an incentive or loyalty discount.

2. When you buy an item which a vendor is willing to give out on installment, you may
be able to convince him/her to give you a cash discount if you are willing to pay the full
amount in cash.

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3. During Christmas season and you shop for gifts for your friends and family, we
convince sellers to give us a discount if we buy a stated minimum number of items.
This is called a volume discount.

To compute for the TRADE DISCOUNT:

TRADE DISCOUNT = TRADE DISCOUNT RATE x SELLING PRICE

There are two types of trade discounts. These are the Single Trade Discounts and Trade
Discount Series.

What is Single Trade Discounts?

Single trade discount or trade discount refers as “one-off” discount. A

reduction in price is given to a client when a specific condition on their buying method
is met.

The following are sample problems on single trade discounts.

Example 2.1: My regular meat supplier gives me 10% discount on my purchases every
week. If the price of the meat is ₱375.00 and I plan to buy 2.5 kg, how much discount
will I receive?

Given:
₱375.00 – price per kilo of meat
10% – trade discount rate
2.5 kg – kilos of meat to purchase

Unknown: Trade discount

Solution:
First let us compute the total sales to be used as selling price.

Total Sales = 375 x 1.5

= 937.50

Trade discount = Trade discount rate x Selling Price

= 0.10 x 937.50
= 93.75

Therefore, I will get a ₱ 93.75 discount for a 2.5kg meat purchase.

Example 2.2: My mother admired a necklace that her friend was offering for ₱ 34,000,
payable in 12 months. She will be given 12% discounts if she will pay in cash. How
much will be the discount and how much will she pay?

Given:

₱34, 000.00 – price per kilo of meat

12% – trade discount rate
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 Unknown: Trade discount and Amount to pay in cash

Solution:

Trade discount = Trade discount rate x Selling Price

= 0.12 x 34 000.00
= 4 080.00

Discounted Price = Selling Price – Trade discount

= 34 000 – 4 080
= 29 920

An alternative solution to solve for the discounted price:

Since trade discount is 12%, customer pays 88% of the selling price, that is
Discounted Price = 34 000 x 0 .88
= 29 920

Therefore, my mother will have a discount of ₱ 4, 080.00 and must pay in cash by
₱29, 920.00

Example 2.3: Sarah gave away each of his 40 guests a figurine with a unique design as a token on
her 18th birthday. She found a supplier who gives 8% discount for a minimum of 25 items purchased.
The total cost of the figurine purchased amounted to ₱ 4,950. How much was the unit selling price
of the said item?

Given:

8% or 0.08 – trade discount rate

₱ 4,950 – the total payment

Unknown: Price per unit of the figurine

Solution:

To solve for the original selling price, we will use the formula:

𝑇𝑜𝑡𝑎𝑙 𝑃𝑎𝑦𝑚𝑒𝑛𝑡
Original Selling Price =
(1−𝑡𝑟𝑎𝑑𝑒 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑟𝑎𝑡𝑒)

= 5 380.43

The Original Selling price is ₱ 5, 380.43

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To solve for the Unit Selling Price,

𝑂𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒

Original Unit Selling Price =
𝑁𝑜 𝑜𝑓 𝑖𝑡𝑒𝑚𝑠 𝑏𝑜𝑢𝑔ℎ𝑡

5 380.43
=
40

= 134.51

Discounted price per figurine is:

𝑇𝑜𝑡𝑎𝑙 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒

Discounted price =
𝑁𝑜 𝑜 𝑖𝑡𝑒𝑚𝑠 𝑏𝑜𝑢𝑔ℎ𝑡

4950
Discounted price =
40

Discounted price = ₱123.75

Therefore, the original unit selling price of the figurine is ₱134.51 and the discounted
price us ₱ 123.75.

What is Trade Discount Series?

Trade discount series refers to more than one discount given by the seller on a
product. For example, the seller could give three discounts in 20%/10%/5% in this
manner. These are computed by taking each discount as percent of the price after the
previous discount. To understand better, let us take some examples.
Example 2.4: A computer hardware store offers a series discount of 20%/15%/5% for
any orders above ₱ 5,000.00. If a buyer ordered two printers that costs ₱ 4, 999.00 each.
How much will the buyer pay for the printers?

Given:
20%/15%/5% – discount rate (TDR)
₱4, 999.00 – price per printer

Unknown: Discounted price

Solution:

Step 1: Solve for the non-discounted price of the 2 computers.

Non-discounted price = Unit Selling price x Number of items

= 4, 999.00 x 2
= 9 998.00

Discounted Price = (1- TDR 1) x (1- TDR 2) x (1-TDR 3) x Non-discounted Price

= (1-0.20) x (1- 0.15) x (1-0.05) x (9 998.00)
= (0.80) x (0.85) x (0.95) x (9 998.00)
= 6 458.71

Therefore, using the trade discounts series given, the buyer will pay only
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₱6,458.71.

Example 2.5: An online seller gives the buyer a trade discount series 30%/20%/10%
for purchasing a DSLR Camera worth ₱ 20, 000.00. Find the:

a. Net price or Discounted price

b. Single Equivalent Discount.

Given:
30/20/10 – discount rate (TDR)
₱20, 000.00 – Selling Price/ Non-discounted price

Unknown: Discounted price and Single Equivalent Discount.

Solution:

a) Discounted Price = (1- TDR1) x (1- TDR2) x (1-TDR 3) x Non-discounted Price

= (1-0.30) x (1- 0.20) x (1-0.10) x (20 000.00)
= (0.70) x (0.80) x (0.90) x (20 000.00)
= 10 080.00

b) To Solve for Single Equivalent Discount (SED), we will use the formula

𝑆𝐸𝐷 = 1 − [(1 − 𝑇𝐷𝑅1)𝑥(1 − 𝑇𝐷𝑅2)𝑥(1 − 𝑇𝐷𝑅3]

𝑆𝐸𝐷 = 1 − [(1 − 0.30)𝑥(1 − 0.20)𝑥(1 − 0.10)]
𝑆𝐸𝐷 = 1 − [(0.70)𝑥(1 − 0.80)𝑥(1 − 0.90]
𝑆𝐸𝐷 = 1 − 0. 504
= 0.496 𝑂𝑅 49.6%

Therefore, net price or discounted price a buyer will have to pay is ₱10 080.00 and the
single equivalent trade discount for the discount series is 49.6%

What’s More

Activity 2.2: NOW IT’S YOUR TURN!

Instruction: Read and solve the problem. Write your answer on a separate sheet. Show
your solutions.

1. An item listed at ₱ 1, 500.00 is subject to 20%/10%/5% discount series. Determine

the net price.

2. A BBQ grill is listed for ₱ 3, 500.00 less 10%/5%/2% discount series.

a) What is the net price?
b) What is the exact single rate of discount allowed?

13
 What I Need to Remember

Single Trade Discount- is a one-off discount given when a buyer meets certain
conditions to qualify for a discount.
Trade Discount Series – is given through a combination of conditions. A more than one
discount is given in a purchased made by the buyer.

Trade discount = Trade discount rate x Selling Price

Non-discounted price = Unit Selling price x Number of items
Discounted Price = (1- TDR 1) x (1- TDR 2) x (1-TDR 3) x Non-discounted Price
𝑆𝐸𝐷 = 1 − [(1 − 𝑇𝐷𝑅1)𝑥(1 − 𝑇𝐷𝑅2)𝑥(1 − 𝑇𝐷𝑅3]

What I Can Do

Activity 2.3: WRITE IT UP!

Instructions: Answer the following questions below and write it on a separate sheet of
paper.

1. Were there situations in your life that you could compare with or consider markon,
markup, or markdown? Explain your answer.

2. When offered with single trade discounts or discounts series, would you avail of them
right away? Why or why not?

The rubric below will be used to rate your answer.

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 Assessment (Posttest)

Directions: Read each item carefully. Answer what is being asked. Write the letter of
the correct answer on a separate sheet of paper.

1. Which of the following statements refers to cost used directly in making the product?

A. Cost of Goods Sold C. Gross Profit

B. Gross Margin D. Net Sales
2. It refers to part company’s return of profit after the cost of goods has been deducted.

A. Discount Series C. Gross Profit

B. Gross Margin D. Trade Discount
3. A term refers to the amount added to cost of goods to come up of the selling price.
A. Margin C. Markon
B. Markdown D. Markup

4. A reduction given to customer at once if a condition is met.

A. Gross Margin C. Single Trade Discount
B. Gross Profit D. Trade Discount Series
5. It refers to the total amount acquired from sales in a specific period.
A. Cost of Goods Sold C. Gross Profit
B. Gross Margin D. Net Sales
6. The difference between the company’s net sales and cost of goods.
A. Discount Series C. Gross Profit
B. Gross Margin D. Trade Discount

7. It is the quotient between Gross profit and selling price.

A. Gross Margin C. Markon Rate
B. Markdown Rate D. Markup Rate
For numbers 8 to 12, use the problem below:

RTY Manufacturing Co. sells glass cabinets. The profit for the last 3 years is presented
in the table below.

2014 2015 2016

Net Sales ₱ 96, 750.00 ₱ 81, 275.00
Cost of Good Sales ₱ 54, 300.00 ₱ 54, 900.00 ₱ 64, 350.00
Gross Profit ₱ 30, 625.00 ₱ 34, 475.00
Gross Margin

15
8. What is the Gross Profit in 2014?
A. ₱ 26, 250.00 C. ₱ 113, 250.00
B. ₱ 42, 450.00 D. ₱ 3, 034,125.00
9. What is the Gross Margin in 2014?
A. 0.58% C. 43.88%
B. 0.68% D. 56.12%
10. Compute for the Net Sales in 2015.
A. ₱ 14, 725.00 C. ₱ 45, 625.00
B. ₱ 24, 275.00 D. ₱ 85, 525.00
11. What is the Gross Margin in 2015?
A. 0.40% C. 35.81%
B. 0.68% D. 44.78%
12. What is the Gross Margin in 2016?
A. 0.57% C. 42.42%
B. 0.75 % D. 79.18%
13. Find the net price of a cellphone that is listed at ₱ 8,999.00 and has a trade discount
of 15%.
A. ₱ 1, 349.85 C. ₱ 9,998.88
B. ₱ 7, 649.15 D. ₱ 89, 990.00

For numbers 14 and 15, use the problem below:

An appliance store offers a trade discount series of 15%/8%/5% for a refrigerator
listed for a price of ₱ 11,500.00.

14. What is the discounted price of a refrigerator?

A. ₱ 3, 220.00 C. ₱ 8, 543.35
B. ₱ 8, 280.00 D. ₱ 11, 470.00
15. What is the equivalent single rate discount for the discount series?
A. 0.28% C. 25.71%
B. 28.00% D. 78.00%

16
 Answer Key

b) SED = 0.1621 or 16.21%

a) Net Price = ₱ 2,932.65

2)

Net Price = ₱ 1,026.00

1)
Activity 2.1 Now It’s Your Turn!

10) 5)
5) Gross Margin = 0.125or12.50%
4) Net Sales = ₱ 80,000.00 9) 4)
3) Gross Profit = ₱ 30,000.00 8) 3)
2. Gross Margin = 0.304 or 30.40% 7) 2)
1. COG = ₱ 65,200.00
II. 6) 1)

Activity 1.1 Now It’s Your Turn!

References

BOOKS

Solano, Dr. Irene P. "Business Math." In Business Math, by Denmark C. Alarcon Dr.
Irene P. Solano. Makati City,Philippines: Diwa Learning Systems,Inc, 2016.

Tesorio, Ma. Luisa V.,Raul T. Villaluna Jr., Flordelita G. Male. "Conversion of

Fractions to Decimals and Percent." In Business Mathematics, by Thelma T.
Villanueva. Valenzuela City, Philippines: Tru-Copy Publishing House, Inc, n.d.

Rey, Mia P. Ph.D. "Buying and Selling." In Teaching Guide for Senio High School
Business Mathematics, by Ph.D., Ma. Lailani B. Walo, Ph.D., et al Lorna I.
Paredes, 67-85. Quezon City: Commission on Higher Education, 2016.

ONLINE SOURCES

Bragg, Steven. Gross Margin. March 16, 2019.

https://www.accountingtools.com/articles/2017/5/9/gross-margin (accessed
August 5, 2020).
17
Gross Margin. 2019. https:www.investopedia.com/terms/g/grossmargin.asp (accessed
August 5, 2020).
Hayes, Adam. Gross Profit and Gross Margin. April 23, 2020.
https://www.investopedia.com/ask/answers/101314/what-are-differences-
between-gross-profit-and-gross-margin.asp (accessed August 6, 2020)

IMAGE SOURCES

Image 1 source: https://bit.ly/3BN5PI4

Image 2 source: https://bit.ly/3rC47Vh

Image 4 source : source: https://tinyurl.com/Flow-of-Goods-and-services

Congratulations!
You are now ready for the next module. Always remember the following:

1. Make sure every answer sheet has your

▪ Name
▪ Grade and Section
▪ Title of the Activity or Activity No.
2. Follow the date of submission of answer sheets as agreed with your teacher.
3. Keep the modules with you AND return them at the end of the school year or
whenever face-to-face interaction is permitted.

Appendix
Appendix A
RUBRIC FOR WHAT I CAN DO

Needs Improvement Good Excellent

Criteria
(1Point) (2 Points) (3 Points)
Content Answer are partial or Answer is not Answers are
incomplete. Key comprehensive or comprehensive,
points are not clear. completely stated. Key accurate and
Answer is not enough points are addressed, complete. Key ideas
to answer the but not well are clearly stated,
question. supported. explained, and well
supported.
Organization Inadequate Organization is Well organized,
organization. mostly clear and easy articulately developed
Structure of the to follow. and easy to follow.
answer is not easy to
follow.
Writing Conventions Displays 5 or more Displays 1-4 or more Displays no errors in
errors in spelling, errors in spelling, spelling, punctuation,
punctuation, punctuation, grammar, and
grammar, and grammar, and sentence structure
sentence structure sentence structure

18