Retail businesses make a profit by Trade and cash discounts are never Net Cost or Net price (the

Net Cost or Net price (the amount paid by

purchasing items and then selling them for applied to shipping and insurance charges. the buyer).
more than they cost. The applicable shipping and insurance Net cost = List price- Trade discount Trade
Wholesaler, often called a “middleman," charges must be added to the invoice total discount
buys from manufacturers or other to find the total amount due. List Price
wholesalers and sells to the retailer. - Trade discount
Retailers sell directly to the ultimate user, UNDERSTAND COMMON SHIPPING Net Cost
the consumer. TERMS FOB (free on board) is commonly
Invoices help businesses keep track of appears on invoices. The term FOB EXAMPLE
sales, while various types of discounts help shipping point means that the buyer pays Calculating a Single Trade Discount
them buy products at lower costs so that for shipping and that ownership of the The list price of a meat processor is P9,980
they can increase profits. Recent merchandise passes to the purchaser prior and the trade discount is 25%. Find the net
technology has enabled businesses to to shipment. The term FOB destination Cost.
replace much of their paper-based means that the seller pays the shipping Solution
business processes with electronic charges and retains ownership until the First find the amount of the trade discount
solutions, known collectively as electronic goods reach the destination. by finding 25% of P9,980.
commerce (EC). R x B = P
COD means cash on delivery. When goods 25% x 9,980 = .25 x 9980 = 2,495
Invoice is a printed record of a purchase are sent COD, the shipper delivers to the
and sale. For the seller it is a sales invoice purchaser on receipt of enough cash to pay P 9,980 List Price
and records a sale; for the buyer it is a for the goods. - 2,495 Trade discount
purchase invoice and records a purchase. FAS means free alongside ship. When P 7,485 Net Cost
The invoice identifięs the seller and the goods are moved over water, the shipping The net cost of the food processor is
buyer; describes the item purchased; term FAS is common. P7,485.
states the quantity purchased; and WHY TRADE DISCOUNTS CHANGE
provides the unit price of each item. In CALCULATE TRADE DISCOUNTS AND  Price changes may cause trade
addition, the invoice shows the extension UNDERSTAND WHY THEY ARE GIVEN discounts to be raised or lowered.
total (the number of items purchased times Trade discounts are often given to  As the quantity purchased increases,
the price per unit); applies any discounts businesses or individuals who buy an item the discount offered may increase
and shipping and inisurance charges; and for resale or produce an item that will then  The buyers position in marketing
provides the invoice total (the sum of the be sold. channels (manufacturer → wholesaler
extension totals). List price is the suggested price which the → retailer → consumer) may
item can be sold to the public. determine the amount of discount
 offered. (A wholesaler would receive USE COMPLEMENTS TO CALCULATE Series Discount 20 / 10 / 10
a larger discount than a succeeding SERIES DISCOUNTS Complements respect to 1 .8 .9 .9
retailer.) Multiply complement .8 x .9 x .9 =
 Geographic location may influence .648
the trade discount. An additional P30,950 list price
discount may be offered to increase x .648 net cost equivalent
sales in a particular area. P20,055.60 net cost
 Seasonal fluctuations in sales may 30,950– 20% - 10% - 10% = 20,055.60
influence the trade discounts offered. Never round the net cost equivalent
 Competition from other companies
Example
may cause the raising or lowering of SINGLE DISCOUNT EQUIVALENT
Using Complements to Find the Net
trade discounts. Express a series discount as an
Cost
Example Equivalent Single Discount
Kitchen Picks is offered a series discount of
Calculating Sęries Trade Discounts
20/10 on a griller with a list price of P1,500.
Kitchen Picks is offered a series discount of Example
Find the net cost after the series discount.
20/10 on a griller with a list price of P1,500. Finding the Single Discount Equivalent
Find the net cost after the series discount. If the Alger Energy, Inc., offered a 20/10
Solution discount to wholesale accounts on all
P1,500 list Price heating, ventilation, and cooling systems,
Series Discount 20 / 10
Discount:20/10 what would the single discount equivalent
Complements respect to 1 .8 .9
- 300 (.2 x 1500) be?
Multiply complements .8 x .9 = .72
P1,200 Solution
NCE
- 120 (.1 x 1200) Series Discount 20 / 10
P 1,500 list price
P1,080 net cost Complements respect to 1 .8 .9
x .72 net cost equivalent
Multiply complements .8 x .9 = .72
P 1,080 net cost
NCE
1500 – 20% - 10% = 1080
1.00 base (100%)
Example
- .72 net cost equivalent
Using Complements to Solve Series
.28 or 28% was discounted
Discounts
The single discount eguivalent of a 20/10
The list price of a combination gas and
series discount is 28%.
electric stove is P30,950. Find the net cost
FIND THE NET COST BY MULTIPLYING
after a series discount of 20/10/10.
THE LIST PRICE BY THE COMPLEMENTS
OF THE SINGLE DISCOUNTS IN A Use the Ordinary Dating Method Example 2
SERIES There are many methods for finding cash Finding the Amount Due on an Invoice
Net cost can be found by multiplying the discounts, but nearly all of these are based An invoice received by Kitchen Picks for
list price by the complements of each of on te ordinary dating method. The method P8,400 is dated July 1 and offers terms
the single discounts in a series as shown in discussed here is the most common in use 2/10, n/ 30. If the invoice is paid on July 8
the example. today. The ordinary dating method of cash and the shipping and insurance charges,
Example discount, for example, is expressed on an which were shipping point, are P187, find
Finding the Net Cost Using invoice as 2/10, n/30 or 2/10, net 30 the total amount due.
Complements and is read "two ten, net thirty.” Solution
The list price of an oak dinette set is 1. The invoice was paid 7 days after its
P4950. Find the net cost if trade discounts date (8-1 = 7); therefore, the 2% cash
of 20/ 15/5 are offered. discount is taken.
Solution 2. The 2% cash discount is found on
4,950 x .8 x .85 x .95 = 3,197.70 P8,400. The discount to be taken is P8,400
FIND THE LIST PRICE GIVEN THE x 0.2 = P168.
SERIES DISCOUNT AND THE NET COST 3. The cash discount is subtracted from the
Example invoice amount to determine the amount
Solving for list price due. P8,400 invoice amount-P168 cash
Find the list price of a food processor that discount (2%) = P8,232 amount due.
has a net cost of P2432 after trade Example 4. The shipping and insurance charges are
discounts of 20/ 20. Finding Cash Discount Dates added to find the total amount due. P8,232
Solution A company’s invoice is dated January 2 and amount due + P187 shipping and
B = P/ R 2432 offers terms 2/10, net 30. Find (a) the last insurance = P8,419 total amount due.
.64 date on which the 2% discount may be When the terms of an invoice are
= 3800 taken, and (b) the net payment date. 2/10, only 98% (100%-2%) of the invoice
CASH DISCOUNTS: ORDINARY DATING Solution must be paid during the first 10 days.
METHOD (a) Beginning with the invoice date, P8,400 x .98 = P8,232
Calculate Net Cost after Discounts January 2, the last date for taking the
Cash Discounts are offered by sellers to discount is January 12 (2 + 10). MARK UP ON COST
encourage prompt payment by customers. (b) The net payment date is February 1 Terms used in Selling
“ Pay me quickly, and receive a discount”. (31-2 = 29 days remaining in January plus Cost is the amount paid to the
Finding Net Cost 1 in February.) manufacturer or supplier after trade and
Net Cost = (List price – Trade Discount) –
Cash discount
 Using the basic markup formula Solution
100% C P3,000 base
C P1,000 Rate 25% M P 750 portion (750/3000)
+ M P 500 125% S P3,750
S P1,500 May other way din to compute this, which
is mas madali
Calculate Markup Based on Cost 3750 – 3000 / 3000 = .25 or 25%
cash discounts have been taken. Shipping
Markup based on cost is expressed asa Example
and insurance charges are included in cost.
a percent of cost. Finding cost when cost is base
Selling Price is the price at which
Suppose an item costs P200 and sells Alroy Sports has a markup on an iron
merchandise is offered for sale to the
P300, and markup is based on cost. To find barbell set of P1,600, which is 50% based
public.
markup percent, percent of markup on on cost.
Mark up, margin, or gross profit is the
cost, and percent of selling price on cost: Solution
difference between the cost and selling
100% C P200 Base 100% C P3,200 Base (1600 / 50%)
price.
Rate 50% M P100 Portion Rate 50% M P1,600 Portion
Operating expenses, or overhead,
150% S P300 Rate 150% S P4,800 Portion
include the expenses o operating the
(Cost plus markup is always equal to Example
business, such as wages and salaries of
selling price) Find markup and selling price
employees, rent for buildings and
Base is always 100% Find the markup and the selling price for a
equipment, travel and entertainment,
Rate = Portion / Base basic calculator if the cost is P236 and the
utilities, insurance, and advertising.
Base = Portion / Rate markup is 25% of cost.
Net Profit is the amount remaining for the
Portion = base x rate Solution
business after operating expenses and the
100% C 236 base
cost of goods have been paid.
rate 25% M 59 portion (236 x 25% =
59)
Use the basic Formula for Markup
APPLY PERCENT TO MARKUP 125% S 295 (236 +
Whether markup is based on cost or on
PROBLEMS 25% = 295)
selling price, the same basic markup
Example
formula is always used: C + M = S or
Solving for percent of markup on cost MARKUP ON SELLING PRICE
Cost C
The manager of Amando Shoes bought Understand the phrase “markup
+ Markup or +M
some hiking shoes for P3,000 a pair and based on selling price”
Selling price S
will sell them for P3,750 a pair. Find the If markup is based on selling price, then
percent of markup based on cost. selling price is the cost.
Example
 Disregard nio na lang yung negative sign 20% M P 39.50 (197.50 x 20%)
“Always remember that portion and rate 100% S P 197.50
must always correspond” DETERMINE PERCENT MARKUP ON
COST AND THE EQUIVALENT PERCENT
MARKUP ON SELLING PRICE
Example
Determining Equivalent Markups
Alice sells fishing set to both fishing-
When markup on selling price is calculated, USE THE MARKUP FORMULA TO SOLVE equipment wholesalers and sporting- goods
the same markup formula is used, C + M = VARIATIONS OF MARKUP PROBLEMS stores. If the set costs her P1,260 and she
S Example sells it for P1,575, what is the percent of
Solving markup problems when selling Finding cost when selling price is base markup on cost? What is the percent of
price is the base An Alroy sports employee knows that the markup on selling price?
Example weight gloves in stock have a markup of Solution
Solving for markup on selling price P103.20, which is 35% based on selling 100% C P1,260 base
To remain competitive, Alroy sports must price. Find the cost of the weight gloves. (315 / 1260) 25% M P 315
sell oversized drivers and woods with Solution portion
graphite shafts for P3,999. They pay 65% C P191.66 (294.86 – 103.20) 125% S P 1,575 portion
P3,500 for each golf club and calculate 35% M P103.20 Markup on cost is 25%
markup on selling price. Find the amount of 100% S P294.86 (103.20 / 35%)
markup, the percent of markup on selling Example 120% C P1,260 portion
price, and the percent of cost on selling Finding markup when selling price is (315 / 1575) 20% M P 315
price. given portion
Note that the base is the selling price Alicia, an employee at Alroy sports, must 100% S P1,575 base
Solution calculate the markup on a three-pack of Markup on selling price is 20%
(3500 / 3999) 87.5% C P3,500 tennis balls. The selling price of the tennis “25% markup on cost is equivalent to a
portion 20% markup on selling price.
(499 / 3999) 12.5% M P
499 portion CONVERT MARKUP PERCENT ON COST
100% S P3,999 base balls is P197.50 and the markup is 20% of TO SELLING PRICE
Puwede rin yung diretsuhan na sa selling price. Find the markup.
calculator: Solution
3500 / 3999 = 87.5% - 100% = -12.5% 80% C P 158 (197.50 x 80%)
 Convert a markup of 20% on selling price that totaled P5,300, what is the percent of
to its equivalent markup on cost. markdown on the original price?
Solution Solution
20% / 100% - 20% P7,850 original price
20% / 80% = 25% - P5,300 reduced price
.20 / .80 = .25 P2,550 markdown
“20% markup on selling price is equivalent Rate = Portion / Base
to 25% markup on cost “ 2550 / 7850 = 32%

MARKDOWN Finding original price

Markdowns are used to stimulate sales Aliza Baby Stuff offers a child’s car seat at
volume. a reduced price of P6300 after a 25%
It is the difference between the original markdown from the original price. Find the
selling price and the reduced selling price. original price.
Basic formula for markdown Solution
Reduced price = Original price – markdown
Example Example
Converting markup on cost to markup Finding the reduced price
on selling price Alroy sports has marked down a Base = Portion / base
Convert a markup of 25% on cost to its tournament air hockey. Find the reduced 6300 / 75% = 8400 (original price)
equivalent markup on selling price. price if the original price was P28,790 and Pwede rin siyang i-calculate through
Solution markdown is 30%. adding 6300 and 25%, which is more easier
25% / 100% + 25% Solution to use.
25% / 125% = 20% P28,790 original price 6300 + 25% = 8400
.25 / 1.25 = .20 - P 8,637 markdown (28,790 x
“25% markup on cost is equivalent to 20% 30%) Determine the Break even point and
markup on selling price” P20,153 reduced price operating loss
Break-even point is the point at which
CONVERT MARKUP PERCENT ON SELLING the reduced price just covers cost plus
PRICE TO COST Calculating Percent of markdown overhead (operating expenses).
Example The total inventory of friendship cards at a Operating loss occurs when the reduced
Converting Markup on Selling price to large gift shop gas a retail value of P7,850. price is less than the break even point. It is
markup on cost If the cards were sold at reduced prices
the difference between break-even point
and reduced selling price.
Determine the Amount of a Gross or
Absolute Loss
An absolute loss or gross loss is the result
of a reduced price that is below the cost of
the merchandise alone. It is the difference
between the cost and reduced selling price.
Break-even point = Cost + Operating
Expenses
Operating Loss = Break-even point –
Reduced selling price
Absolute Loss = Cost – Reduced selling
price

Determining a Profit or a Loss

Algis Appliance paid 4000 for an energy-
efficient personal refrigerator. If operating
expenses are 30% of cost and the
refrigerator is sold for 5000, find the
amount of profit or loss.
Solution