GENESIS CHILDREN’S GROWTH ACADEMY San Francisco, Ocampo, Camarines Sur BUSINESS MATHEMATICS 1 Quarter Topic 4: BUYING AND SELLING (Trade Discounts, Profit and Loss) |. OBJECTIVES 1, Illustrate how to compute single trade discounts and discount series. 2. Illustrate how profit is obtained and how to avoid loss in a given transaction. 3. define breakeven and illustrate how to determine breakeven point. Il, INTRODUCTION Trade Discounts The list price is the manufacturer's suggested retail price for a product. A trade discount is an amount deducted from the list price of a product. A trade discount is usually expressed as a percentage of the list price. The resulting price after the discount is applied is called the net price or the invoice price. ‘Assuming the list price and the discount rate are known, the net price after the discount can be computed either by the discount method or the complement method, To find the net price with the discount rate, we first compute the discount amount as follows: Discount = Rate of Discount x List price The net price is then the difference between the list price and the discount: Net Price = List Price - Discount To find the net price by the complement method, we compute the complement rate, which is 100% minus the trade discount rate. The net price is then obtained as follows: Net price = Complement Rate x List price In the case of a discount series, both the discount method and the complement method can still be used to ‘compute the net price. However, unlike before, the steps must be repeated for each discount in the series. Ifthe discount rates are r1,r2,..., ', then the single discount equivalent rate of the discount series is given by 121-17 )(1-72)..(1 74). Example 7 Method 1. Discount Method ‘An auto supply store sells auto spare parts for 9,600.00, subject to a 12% trade discount. Calculate the 1. amount of trade discount, and 2. net price. Solution 1, We compute the trade discount as follows: Discount = Rate of Discount x List Price (0.12)( 9,600.00) 1,152.00 2. The net price is given by Net Price = List Price ~ Discount {9,600.00 - 1,152.00 = P8,448,00 Example 8 Method 2. Complement Method Use the complement method to compute the net price of the merchandise in Example 7. Solution The complement rate is given by 100%-12%=88%. Thus, the net price can be computed as follows: Net Price= Complement Rate x List Price = (0.88)( P9,600.00) 8,448.00 which is, of course, the same as the net we obtained in Example 8. Computing the equivalent single discount rate Exemple 9 A scientific calculator worth 1,495.00 is subject to 10% and 5% trade discounts. Find the following: 1. single rate equivalent to the trade discounts 2. net price; and 3. trade discount, Solution 1, Solving for the single rate discount r, we have -(1-14)(1-r2) -(-0.10)(1-0.05) = 0.145 2. By the complement method, the net price is given byNet Price = List Price x Complement Rate =P1,278.00 3. To solve for the trade discount, we have Trade Discou Profit and Loss The profit and loss is the difference between the gross revenue and the total cost, provided that the revenue is greater than the cost. The loss of a business is the difference between the total cost and the generated revenue, provided that cost is greater than the revenue. The profit and loss is given by Profit/Loss=Revenue-Cost where it is a profit if Revenue>Cost and a loss, otherwise. A business is in breakeven if the total revenue generated is equal to the total incurred. The number of items that must be sold to attain this is called the breakeven point. Example 10 A carinderia owner eared a total of P5, 650.00 for the day. Looking at her notebook, she noted that she has spent a total of P3, 125.00 on the same day to cover all the ingredients and other things she used for her store. Determine her profit for the day, if any. Solution Her gross revenue is 5,650.00, while her total cost is P3, 125.00. Then, her profit is given by Profit = 5,650.00 ~ 3,125= 2,525 or 2,525.00 Avoiding Losses Betty plans to sell customized bags in an upcoming bazaar. To create one bag, she has to spend 412.00 for the materials, and she will sell it for 450.00. To participate in the bazaar, she has to pay participation and rental fees totaling 5,000.00. If she was able to create 130 bags, and she will believes she can sell them all, should she participate in the bazaar? Solution The total expected revenue of Betty is P450 x 130 equals P58,500 while her expected production cost is P412 x 130 equals P53, 560. Then her expected profit/loss is Profit/Loss= 58,500 ~(53,560+5,000)= -60 a loss of P60.00. Since she will incur a loss, it would be best for not to join the bazaar, or produce more bags. Determining Breakeven ‘A company sells tablets for 4,300.00. If the cost to produce one tablet is P3, 100.00, and the company has a total fixed cost of 36,000.00, determine the company's breakeven point. Solution Let x be the number of tablets sold. Then, Revenue = Cost 4,300x= 3,100x +36,000 Thus, the breakeven point is 30. il, INDEPENDENT PRACTICE A. Trade Discounts. Answer the following problem. 1. A sports trader bought a basketball jersey for 1,500.00, subject to a 35% trade discount. Find the net price and the trade discount. 2. A computer wholesaler bills a retailer 16,750.00 for a laptop computer, subject to a 10% trade discount, How much is the net price for the laptop? 3. What is the rate of trade discount if a retailer buys an item worth 3,850.00 for 3,250.00 instead? 4, Find the single rate equivalent of the following series of discounts: a, 15% and 10% b. 12% and 8% ©. 10%, 10%, and 5% d. 20%, 15%, and 10%5. The list price of an industrial machine is 84,500.00 and is subject to a 10% discount. What additional discount should be given to bring down the price 70,000.00? B. Profit and Loss. Problem solving 1. A local bookstore earned a total of 7,510.00 for the day. If the expenses incurred for today reached 6,125.00, determine the bookstore's profitiioss. 2. Mark was able to generate revenue of 1,650.00 from his car wash business today. If his profit was P530.00, how much was the expense he incurred for the day? 3. A manufacturing company had total revenue of 21,640.00 for the month of July. The expenses that the company incurred for the said month can be seen below. Costs of Goods Sold 5,641.00 Operating Costs 6,712.00 Depreciation Costs: 1,245.00 Taxes 2 P 2,412.00 Did the company earn profit or incur a loss? How much is its profit/loss? 4. The unit cost of producing one box of chocolates is 150.00, while its unit price is 200.00. There is a fixed cost of 7,500.00 that includes utilities and rent expenses. a, How many boxes of chocolates should be sold to have a profit of 3,200.00.007 b. If 137 boxes of chocolates are sold, how much is the profit earned/loss incurred? c, How many boxes of chocolates should be sold to breakeven? 5. A customized notebook has a unit cost of 23.00 and a unit price of 30.00, How much is the fixed cost if the breakeven point is 143 notebooks?