A $50 thermometer is sold in bulk to your store for $42. Calculate the trade discount rate.
Answer (2)
Calculate the discount amount: $50 − $42 = $8 .
Calculate the discount rate: $50 $8 = 0.16 .
Convert the discount rate to a percentage: 0.16 × 100 = 16% .
The trade discount rate is 16% .
Explanation
Understanding the Problem We are given that a thermometer with a list price of $50 is sold to a store for $42. We need to find the trade discount rate.
Calculating the Discount Amount First, we need to calculate the trade discount amount. This is the difference between the list price and the selling price. So, the discount amount is: D = List Price − Selling Price = $50 − $42 = $8
Calculating the Discount Rate Next, we calculate the trade discount rate. This is the discount amount divided by the list price, expressed as a percentage. So, the discount rate is: R = List Price Discount Amount = $50 $8 = 0.16 To express this as a percentage, we multiply by 100: R = 0.16 × 100 = 16%
Final Answer Therefore, the trade discount rate is 16%.
Examples
Trade discounts are commonly used by manufacturers and suppliers to incentivize retailers to purchase their products in bulk. For example, a clothing manufacturer might offer a trade discount to a department store that buys a large quantity of shirts. Understanding how to calculate trade discount rates helps businesses analyze the true cost of goods and manage their profit margins effectively. This also helps in comparing offers from different suppliers to make informed purchasing decisions.
The trade discount rate for the thermometer sold at a price of $42 from a list price of $50 is calculated to be 16%. This is found by determining the discount amount and dividing it by the list price. The final trade discount rate is 16%.
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