Lesson 3.

Discounts

Business Mathematics
Accountancy, Business, and Management

1
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2
Discounts encourage
clients to buy large
quantities. These
could also serve to
reward their loyalty.

3
Do you agree that giving
discounts is
advantageous to buyers
and disadvantageous to
sellers?

4
Quick Look

Perks of Being A Loyal Customer

As a loyal customer of an online shop, you are entitled to
a 20% discount for purchasing items worth at least ₱500.
Your total bill is ₱1,200. What is 20% of your total bill?

5
Quick Look

Solution:

Step 1: Identify what is required in the problem.

You are asked to calculate 20% of your total bill (D).

6
Quick Look

Solution:

Step 2: Identify the given in the problem.

The total bill (A) and the rate (R) are given.

A = ₱1,200
R = 20%

7
Quick Look

Solution:
Step 3: Write the working equation.
D = A∙R

Step 4: Substitute the given values.

D = A∙R
D = (1,200)(0.20) = 240
8
Quick Look

Solution:
Step 5: Find the answer.
D = 240

The 20% of ₱1,200 is ₱240.

9
Quick Look

Questions to Ponder
1. How do buyers benefit from discounts?
2. What previous experience can you share about the application of
discount?
3. How is giving discounts advantageous to businesses?

10
Learning
Competencies

This lesson aims to target the following DepEd competencies:

● Illustrate how to compute single trade discounts and
discount series (ABM_BM11BS-Ih-5).
● Solve problems involving buying and selling products
(ABM_BM11BS-Ij-9).

11
Learning Objectives

At the end of this lesson, you should be able to do the

following:
● Define trade discount and cash discount.
● Calculate trade discount and cash discount.
● Solve problems involving trade discount and cash discount.

12
Do customers benefit from trade
and cash discounts offered by
manufacturers?

13
Discounts

● Individuals are encouraged to buy in bulk when

discounts are provided; businesses also behave
similarly.
● Controlling the cost is one way to ensure profitability:
○ to maximize profits
○ to sell products at a much lower price

14
Discounts

● Purchasing managers work with suppliers to get the

most considerable discount possible.
● Manufacturers and wholesalers are willing to offer these
discounts to entice retailers to buy large quantities.

15
 Trade Discount

● a deduction given by wholesalers and manufacturers to

the retailers
● retailers earn profit by selling the merchandise to the
end customer at full price
● can be a single discount or a series of discounts

16
 Trade Discount

List Price Net Price

● same as retail price ● same as invoice price
● the price indicated in a ● the amount paid after a
catalog discount has been
applied and subtracted
from the list price

17
 Trade Discount

Single Discount Formulas to use:

● when there is only one
deduction TD = LP – NP
TD = LP ∙ DR
TD = trade discount NP = LP – TD
LP = list price or retail NP = LP(1 – DR)
price
DR = discount rate
NP = net price
18
 Single Discount

1. The list price of a 23-in LCD monitor is ₱12,820. The Closer

Look

retailer is given a 25% discount. What is the net price of

20 monitors?

Solution:
Step 1: Identify what is required in the
problem.
You are asked to calculate the net price (NP) of
20 monitors.

19
 Single Discount

Closer
Look

Step 2: Identify the given in the problem.

The list price (LP) and the discount rate (DR) are
given.

LP = ₱12,820
DR = 25%

20
 Single Discount

Closer
Step 3: Write the working equations. Look

TD = trade discount
TD = LP ∙ DR
NP = LP – TD

21
 Single Discount

Closer
Step 4: Substitute the given values. Look

TD = LP∙DR
TD = (12,820)(0.25) = 3,205

NP = LP – TD
NP = 12,820 – 3,205 = 9,615 ⇒ price of one monitor (₱)
9,615∙20 = 192,300 ⇒ price of 20 monitors (₱)

22
 Single Discount

Closer
Look

Step 5: Find the answer.

NP = 192,300

The net price of 20 monitors is ₱192,300.

23
 Single Discount

Closer
Look
2. A 2-door 7.5 cubic feet refrigerator lists at ₱14,200 and is
billed to the retailer at ₱9,230. How much is the trade
discount rate?

Solution:
Step 1: Identify what is required in the problem.
You are asked to calculate the trade discount rate
(DR).

24
 Single Discount

Closer
Look
Step 2: Identify the given in the problem.
The list price (LP) and the net price (NP) are
given.

LP = ₱14,200
NP = ₱9,230

25
 Single Discount

Closer
Look

Step 3: Write the working equations.

TD = trade discount
TD = LP – NP

26
 Single Discount

Closer
Look
Step 4: Substitute the given values.
TD = LP – NP = 14,200 – 9,230 = 4,970

Step 5: Find the answer.

DR = 35%

The rate of trade discount is 35%.

27
 Trade Discount

Series of Discounts
● when there is at least two trade discounts in any
business

28
 Trade Discount

Series of Discounts
Steps in Calculating a Series of Discounts
1. TD1 = LP ∙ DR1

where
TD1 = 1st trade discount
LP = list price
DR1 = 1st discount rate
29
 Trade Discount

Series of Discounts
Steps in Calculating a Series of Discounts
2. NP1 = LP – TD1

where
NP1 = net price after the first discount

30
 Trade Discount

Series of Discounts
Steps in Calculating a Series of Discounts
3. TD2 = NP1 ∙ DR2

where
TD2 = 2nd trade discount
DR2 = 2nd discount rate

31
 Trade Discount

Series of Discounts
Steps in Calculating a Series of Discounts
4. NP2 = NP1 – TD2

where
NP2 = net price after the second discount

5. Continue the process until the last net price is

computed. 32
 Trade Discount

Series of Discounts
Steps in Calculating a Series of Discounts
5. Total TD = LP – NPn

where
NPn = net price after the last discount

33
 Trade Discount

Series of Discounts
Alternative method:

NP = LP(1 – DR1)(1 – DR2) …(1 – DRn)

34
 Series of Discounts

Closer
Look
1. A desktop computer lists at ₱22,250. The dealer is
offering a series discounts of 30%, 20%, and 5%. Compute
for the net price and total trade discount.

Solution:
Step 1: Identify what is required in the problem.
You are asked to calculate the net price (NP) and total
trade discount (TD).

35
 Series of Discounts

Closer
Look
Step 2: Identify the given in the problem.

The list price (LP) and series of discount rates (DR1,

DR2, and DR3) are given.

LP = ₱22,250.00

DR1 = 30%

DR2 = 20%

DR3 = 5%

36
 Series of Discounts

Closer
Step 3: Write the working equations. Look

TD1 = (LP)(DR1)

NP1 = LP – TD1

TD2 = (NP1 )(DR2)

NP2 = NP1 – TD2

TD3 = (NP2)(DR3)

NP3 = NP2 – TD3

TTD = LP – TD3 37
 Series of Discounts

Closer
Look

Step 4: Substitute the given values.

TD1 = (LP)(DR1) = (22,250)(0.30) = 6,675

NP1 = LP – TD1 = 22,250 –6,675 = 15,575

TD2 = (NP1)(DR2) = (15,575)(0.20) = 3,115

NP2 = NP1 – TD2= 15,575 – 3,115 = 12,460

38
 Series of Discounts

Closer
Look

Continuation...

TD3 = (NP2)(DR3) = (12,460)(0.05) = 623

NP3 = NP2 – TD3 = 12,460 – 623 = 11,837

TTD= LP – NP3= 22,250 – 11,837 = 10,413

39
 Series of Discounts

Closer
Look

Step 5: Find the answer.

The net price is ₱11,837.00.

The total trade discount is ₱10,413.00.

40
 Series of Discounts

Closer
Look

2. A headset listed at ₱5,500 was on sale offering a discount

series of 35 % and 15 %. How much will you pay for the
headset?

Solution:
Step 1: Identify what is required in the problem.
You are asked to calculate the net price (NP).

41
 Series of Discounts
Step 2: Identify the given in the problem.
Closer
Look
The list price (LP) and discount rates (DR1 and DR2) are
given.
LP = ₱5,500.00

DR1 = 35%

DR2 = 15%

Step 3: Write the working equation.

NP = LP(1–DR1)(1–DR2)
42
 Series of Discounts

Closer
Look
Step 4: Substitute the given values.

NP = LP(DR1)(DR2) = (5,500)(1–0.35)(1–0.15) = 3,038.75

Step 5: Find the answer.

You will pay ₱3,038.75 for the headset.

43
 Trade Discount

Single Discount Equivalent

(DER) = 1 – (1 –DR1)(1 – DR1)...(1 – DRlast)

DER = Equivalent series discount rate

DR1 = First discount rate
DRlast = Last discount rate

44
 Single Discount Rate Equivalent of Series of Discounts

Closer
Look

1. Find the single discount equivalent rate of a series of

discounts of 30%, 25%, and 10%.

Solution:
Step 1: Identify what is required in the problem.
You are asked to calculate the single discount equivalent
rate (DER).

45
 Single Discount Rate Equivalent of Series of Discounts

Closer
Look

Step 2: Identify the given in the problem.

The series of discounts (DR1, DR2 and DR3) are given.

DR1 = 30%

DR2 = 25%

DR3 = 10%

46
 Single Discount Rate Equivalent of Series of Discounts

Closer
Look

Step 3: Write the working equation.

DER = 1 – (1 – DR1)(1 – DR2)(1 – DR3)

Step 4: Substitute the given values.

DER = 1 – (1 – DR1)(1 – DR2)(1 – DR3)

= 1 – (1 – 0.30)(1 – 0.25)(1 – 0.10) = 0.5275

47
 Single Discount Rate Equivalent of Series of Discounts

Closer
Look

Step 5: Find the answer.

The single discount equivalent rate is 53.75%.

48
 Single Discount Rate Equivalent of Series of Discounts

Closer
Look

2. Find the single discount equivalent rate and the net price
of a bookshelf listed at ₱7,855 with a series of discount
rates of 25%, 12%, and 8%.

Solution:
Step 1: Identify what is required in the problem.
You are asked to calculate the single discount equivalent
rate (DER) and net price (NP).
49
 Single Discount Rate Equivalent of Series of Discounts

Closer
Look
Step 2: Identify the given in the problem.

The list price (LP) and the discount rates (DR1, DR2, and
DR3) are given.

LP = ₱7,855.00

DR1 = 25%

DR2 = 12%

DR3 = 8%

50
 Single Discount Rate Equivalent of Series of Discounts

Step 3: Write the working equation. Closer

Look

DER = 1 – (1 – DR1)(1 – DR2)(1 – DR3)

NP = LP(1 – DER)

Step 4: Substitute the given values.

DER = 1 – (1 – DR1)(1 – DR2)(1 – DR3)= 1 – (1 – 0.25)(1 – 0.12)

(1 – 0.08) = 0.3928
NP = LP(1 – DER) = 7,855(1 – 0.3928) = 4,769.556 =
4,769.56
51
 Single Discount Rate Equivalent of Series of Discounts

Closer
Look

Step 5: Find the answer.

The single discount equivalent rate is 39.28%.
The net price is ₱4,769.56.

52
 Check Your Progress

A store offered a 25% discount on an imported

1 backpack. It was sold for ₱1,240. Compute the original
price of the backpack.

Answer area

53
 Cash Discounts
Cash discounts are special deductions from the net price
to encourage buyers to pay promptly.

CD = (NP)(RC)
CD = cash discount
NP = net price
RC = rate of cash discount

54
 Cash Discounts

Terms of Cash Discounts

2/10, n/30 (Two ten, n thirty)

A cash discount of 2% is given for payment within ten days

from the date of invoice, and the net amount is due 30
days from the date of invoice.

55
 Cash Discounts

Terms of Cash Discounts

3/10, 2/15, n/60 (Three ten, two fifteen, n sixty)

A cash discount of 3% is given for payment within ten days

from the date of invoice or a cash discount of 2% is given
for payment within 15 days from the date of invoice, or the
net amount is due 60 days from the date of invoice.

56
 Cash Discount

Closer
Look

1. On November 15, 2021, you paid an invoice of ₱12,500

net price which shows the terms 3/10, 2/30, n/60 with an
invoice date of October 30, 2021. How much did you
actually pay?

Solution:
Step 1: Identify what is required in the problem.
You are asked to calculate the total amount paid (C).
57
 Cash Discount

Closer
Look

Step 2: Identify the given in the problem.

The net price (NP), payment date, invoice date and the
terms are given.
Net price (NP) = ₱12,500
Cash discount terms = 3/10, 2/30, n/60
Invoice date = October 30, 2021
Payment date = November 15, 2021

58
 Cash Discount

Closer
Look

Step 3: Write the working equation.

Number of days = Payment date - Invoice date
CD= Cash Discount
CD = (NP)(RC)
C = NP – CD

59
 Cash Discount

Step 4: Substitute the given values. Closer

Look

Count the days from October 30, 2021 to November 15,

2021
16 days from the date of invoice => 2/30 term can be
applied

CD = NP
RC = (12,500)(0.02) = 250
C = NP – CD = 12,500 – 250 = 12,250
60
 Cash Discount

Closer
Look

Step 5: Find the answer.

The actual payment made is ₱12,250.00.

61
 Cash Discount

Closer
Look

2. An invoice dated December 11, 2021 shows the terms

2/10, n/30. When will be the last day of cash discount and
the last day before implementing late charges.

Solution:
Step 1: Identify what is required in the problem.
You are asked to calculate the last day of discount and
last day without penalty.
62
 Cash Discount

Step 2: Identify the given in the problem. Closer

Look

The invoice date and the terms are given.

Cash discount terms = 2/10, n/30
Invoice date = December 11, 2021

Step 3: Write the working equation.

Last day with discount = Invoice date + 10 days
Last day without penalty = Invoice date + 30 days
63
 Cash Discount

Step 4: Substitute the given values. Closer

Look

Last day with discount = Invoice date + 10 days =

December 11 + 10 days
= December 21, 2021

Last day without penalty = Invoice date + 30 days

=December 11 + 30 days
=January 10, 2022

64
 Cash Discount

Closer
Step 5: Find the answer. Look

The last day with cash discount is December 21,

2021.
The last day without late charges is January 10, 2022.

65
 Problems Involving Discounts

● businesses have to
control the costs
○ lower the selling price
○ maximize profits
● they do this by taking
advantage of the
discounts offered by
suppliers

66
Problems Involving Discounts

● purchasing decisions rely

on trade discounts and
cash discounts, or “the
mathematics of
buying”

67
 Problems involving Trade Discounts and Cash Discounts

Closer
Look
1. A newly opened appliance store has desktop fans with a
list price of ₱2,395 with a series of 10% and 5% discounts.
How much is the total discount rate and net price?

Solution:
Step 1: Identify what is required in the problem.
You are asked to calculate the total discount rate (DER)
and net price (NP).

68
 Problems involving Trade Discounts and Cash Discounts

Closer
Look

Step 2: Identify the given in the problem.

The list price (LP) and the discount rates (DR1 and DR2)
are given.
LP = ₱2,395.00

DR1 = 10%

DR2 = 5%

69
 Problems involving Trade Discounts and Cash Discounts

Step 3: Write the working equation. Closer

Look

DER = 1 – (1 – DR1)(1 – DR2)

NP = LP(1 – DER)

Step 4: Substitute the given values.

DER = 1 – (1 – DR1)(1 – DR2) = 1 – (1 – 0.10)(1 – 0.05)=

0.145
NP = LP(1 – DER) = 2,395(1 – 0.145) = 2,047.725

70
 Problems involving Trade Discounts and Cash Discounts

Closer
Look

Step 5: Find the answer.

The total discount is 14.5%.
The net price is ₱2,047.73.

71
 Problems involving Trade Discounts and Cash Discounts

Closer
Look
2. An invoice dated November 5, 2021 shows the term 2/10,
n/30. When will be the last day of cash discount and the
last day before implementing late charges.

Solution:
Step 1: Identify what is required in the problem.
You are asked to calculate the last day of discount and
last day without penalty.

72
 Problems involving Trade Discounts and Cash Discounts

Closer
Look
Step 2: Identify the given in the problem.
The invoice date and the terms are given.
Cash discount terms = 2/10, n/30
Invoice date = November 5, 2021

Step 3: Write the working equation.

Last day with discount = Invoice date + 10 days
Last day without penalty = Invoice date + 30 days
73
 Problems involving Trade Discounts and Cash Discounts

Closer
Look

Step 4: Substitute the given values.

Last day with discount = Invoice date + 10 days =
November 5 + 10 days
= November 15, 2021

Last day without penalty = Invoice date + 30 days =

November 5 + 30 days
=December 5, 2021
74
 Problems involving Trade Discounts and Cash Discounts

Closer
Look

Step 5: Find the answer.

The last day with a cash discount is November 15,

2021.
The last day without late charges is December 5,
2021.

75
 Check Your Progress

An invoice dated March 1, 2021 shows the terms 3/5,

2 2/10, n/30. When will be the last day of cash discount
and the last day before implementing late charges.

Answer area

76
 Discount And Competition

Case S
tudy

Big manufacturing companies would spend a lot to entice

retailers to support their brands. It is common that
manufacturers do not sell directly to the end consumers.
Rather, they have distributors who retail their brands to the
end consumers.

The Impact of Store Brands on Manufacturer Trade Deals and Retail Price Promotion
James M. Lattin, “The Impact of Store Brands on Manufacturer Trade Deals and Retail Price Promotion,”
https://www.gsb.stanford.edu/faculty-research/working-papers/impact-store-brands-manufacturer-trade-deals-retail- 77
price-promotion.
 Discount And Competition

Case S
tudy

The study will analyze if there is any effect with what a

manufacturer and a retailer will do in terms of their
promotional pricing activities.

A manufacturer will sell its own Brand X at its regular price.

In contrast, a retailer will sell Brand X at a promotional price
as well as its own store product, Brand Y.
The Impact of Store Brands on Manufacturer Trade Deals and Retail Price Promotion
James M. Lattin, “The Impact of Store Brands on Manufacturer Trade Deals and Retail Price Promotion,”
https://www.gsb.stanford.edu/faculty-research/working-papers/impact-store-brands-manufacturer-trade-deals-retail- 78
price-promotion.
 Discount And Competition

Case S
tudy

It was found out that a customer’s loyalty to the brand can

be a factor when buying commodities. Brand X is sold at a
promotional price at the retailer’s store while Brand Y is sold
at a regular price but still cheaper. Because of the
consumer’s behavior of being loyal to Brand X, there were
many who bought several pieces.

The Impact of Store Brands on Manufacturer Trade Deals and Retail Price Promotion
James M. Lattin, “The Impact of Store Brands on Manufacturer Trade Deals and Retail Price Promotion,”
https://www.gsb.stanford.edu/faculty-research/working-papers/impact-store-brands-manufacturer-trade-deals-retail- 79
price-promotion.
 Discount And Competition

Case S
tudy

Though the items were bought at the retailers’ store, the

sold products were still Brand X. The thought of getting a
discount from their favorite brand enticed consumers to buy
more.

The Impact of Store Brands on Manufacturer Trade Deals and Retail Price Promotion
James M. Lattin, “The Impact of Store Brands on Manufacturer Trade Deals and Retail Price Promotion,”
https://www.gsb.stanford.edu/faculty-research/working-papers/impact-store-brands-manufacturer-trade-deals-retail- 80
price-promotion.
Keep in Mind

● Businesses have to work hard to keep costs low. If costs are low,
businesses could provide discounts to consumers and maximize
profits. Thus, purchasing decisions consider the discounts offered
by manufacturers and wholesalers.

81
Keep in Mind

● A trade discount is the list-price deduction given by wholesalers

and manufacturers to the retailers. Trade discounts can be a
single discount or a series of discounts.
● Cash discounts are special deductions from the net price to
encourage buyers to pay promptly. It helps manufacturers and
wholesalers avoid borrowing money to continue their operations.

82
Keep in Mind

● Trade discounts and cash discounts are important considerations

in purchasing decisions. It is for this reason that these are also
considered the mathematics of buying.

83
 Try This
Choose the correct answer from the following options:

net price or invoice

1. It is computed by dividing the price
trade discount by the list price.
overdue charges
Answer area
rate of discount

series of discount

total trade discount

84
 Try This
Choose the correct answer from the following options:

net price or invoice

2. It is the multiple discounts price
given to attract buyers.
overdue charges
Answer area
rate of discount

series of discount

total trade discount

85
 Try This
Choose the correct answer from the following options:

3. It is the difference between the net price or invoice

list price and the last net price price
in a series of discounts.
overdue charges
Answer area
rate of discount

series of discount

total trade discount

86
 Try This
Choose the correct answer from the following options:

4. It occurs when a buyer cannot net price or invoice

pay within the terms of price
payment.
overdue charges
Answer area
rate of discount

series of discount

total trade discount

87
 Try This
Choose the correct answer from the following options:

5. It is the amount paid after the net price or invoice

discount/s have been applied price
subtracted from the list price.
overdue charges
Answer area
rate of discount

series of discount

total trade discount

88
 Practice Your Skills
Answer the following question.

1. A single-sized sofa bed has a list price of ₱6,000. How

much will you pay if the rate of trade discount is 13%?

Answer area

89
 Practice Your Skills
Answer the following question.
2. You wanted to buy a cellular phone which is listed for ₱
38,500, 26%, 8%, and 2% discounts. How much is the
total amount of discount?
Answer area

90
 Practice Your Skills
Answer the following question.
3. An office received an invoice for a computer table
issued on February 5 and paid in full on February 9.
The net price is ₱6,540 with the terms 2/10, n/30.
What is the amount paid?
Answer area

91
 Challenge Yourself
Answer the following questions.

1. A company received an invoice for a copying machine

amounting to ₱42,150.00 dated September 13, 2021
with the terms 5/10, 2/30, n/60.
a. Compute the total amount paid if it was paid on
October 31, 2021.
b. Compute the total amount paid if it was paid on
October 14, 2021.
c. Do you think there’s a difference between the
amount of payment if it was paid on October 14 or
31, 2021?

92
 Challenge Yourself
Answer the following questions.

Answer area

93
 Challenge Yourself
Answer the following questions.

2. A garments company received an invoice for sewing

machines amounting to ₱140,000.00 dated August 5,
2021 with the terms 5/10, 2/20, n/60.
a. When is the last day of the cash discount?
b. How much is the amount due if the invoice is paid
on the last day of the discount?

94
 Challenge Yourself
Answer the following questions.

Answer area

95
Photo Credits Bibliography
Clendenen, Gary, and Stanley Salzman. Business
● Slide 1: Mathematics. Essex: Pearson Education
Cut Price Signs On Products Inside A Depot, by Limited, 2015.
Eduardo Soares is free to use under
Pexel license via Pexels. Matiin, James. “The Impact of Store Brands on
Manufacturer Trade Deals and Retail Price
● Slide 3: Carton, by dapple-designers is free Promotion.” Graduate School of Stanford
to use under the Pixabay license via Pixabay. Business. Accessed February 2, 2022.
https://www.gsb.stanford.edu/faculty-resea
rch/working-papers/impact-store-brands-m
● Slide 4: Invoice, by mohammed_hassan is anufacturer-trade-deals-retail-price-promot
free to use under the Pixabay license via ion
Pixabay. .

● Slide 66: Delivery, by mohammed_hassan is Sterling, Mary Jane. Business Math for Dummies.
free to use under the Pixabay license via NJ: Wiley, 2008.
Pixabay. http://mis.kp.ac.rw/admin/admin_panel/kp_
lms/files/digital/SelectiveBooks/Mathemati
cs/Business%20Math%20For%20Dummies
● Slide 67: Online Store, by kreatikar is free to %20-%20%20Mary%20Jane%20Sterling.pd
use under the Pixabay license via Pixabay. f

96