Marketing Essentials n Chapter 27 Pricing Math Section

Marketing Essentials n Chapter 27 Pricing Math Section 27. 2 Calculating Discounts Chapter 27 n Pricing Math 1

SECTION 27. 2 Calculating Discounts What You'll Learn = The general procedure for figuring discounts = How to calculate various kinds of discounts Chapter 27 n Pricing Math 2

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. Chapter 27 n Pricing Math 3

SECTION 27. 2 Calculating Discounts Key Terms = employee discounts Chapter 27 n Pricing Math 4

SECTION 27. 2 Calculating 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 Chapter 27 n Pricing Math 5

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. Chapter 27 n Pricing Math 6

SECTION 27. 2 Calculating Discounts from Manufacturers and Distributors Some common types of discounts offered by manufacturers and distributors are: = cash = trade = quantity = seasonal = promotional discounts Chapter 27 n Pricing Math 7

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 Chapter 27 n Pricing Math 8

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 Chapter 27 n Pricing Math 9

SECTION 27. 2 Calculating 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 Chapter 27 n Pricing Math 10

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 Chapter 27 n Pricing Math 11

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 Chapter 27 n Pricing Math 12

SECTION 27. 2 Calculating 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(%) Chapter 27 n Pricing Math 13

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 Chapter 27 n Pricing Math 14

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? Chapter 27 n Pricing Math 15

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. Chapter 27 n Pricing Math 16

27. 2 Graphic Organizer Discounts from Manufacturers and Distributors Cash Discounts Trade Discounts Promotional Discounts Quantity Discounts Seasonal Discounts Chapter 27 n Pricing Math 17

Marketing Essentials End of Section 27. 2 Chapter 27 n Pricing Math 18