The document discusses trade discounts, including: - A trade discount series of 20/10/5 offers a 20% discount on the list price, an additional 10% discount on the reduced price for a minimum purchase volume, and another 5% discount if paid in cash. - Calculating the discounts for a minimum purchase of 250 pairs of shoes with a list price of PHP2,500 results in a total discount of PHP790 per pair, or an equivalent single discount rate of 31.6%. - A trade discount series is not necessarily equivalent to a single discount at the highest percentage in the series, as a series of 20/10/5 only equals 31.6% rather than the suggested 35%.

1. Buying and Selling

2. 1. The reduction from list price granted to
buyers is called ______________
Trade Discount.
2. When you go to the market and buy
meat from a regular vendor or “suki” (as
we say in Filipino), you are sometimes
given __________________________
Incentive or Loyalty Discount

3. 3. During Christmas season and you shop for
gifts for your friends and family, we
convince sellers to give us a discount if we
buy a stated minimum number of items.
This is called a _______________.
volume discount

4. 4. When you buy an item which a vendor is
willing to give out on installment, you may
be able to convince him/her to give you a
_____________if you are willing to pay the
full amount in cash.
cash discount

5. Trade Discount Series

6. There are times when a supplier also designs
discounts to encourage specific behavior
from its clients. For instance, a supplier
may want to give its distributor a discount
of 20/10/5.
This notation represents a
trade discount series.

7. To interpret, the supplier may, in addition
to the 20% discount it gives the distributors,
slash another 10% from the resulting
discounted price if the distributor purchases
a set minimum volume of items and another
additional 5% if the purchase is paid in cash.

8. Is this equivalent to a 25% single
trade discount?
Let us discover together.

9. If a popular shoe brand promotes this
discount of 20/10/5 for a minimum
volume of 250 pairs of shoes. Assuming
that the unit selling price of the shoes is
PhP2,500, compute the trade discount
per pair of shoes that a distributor
avails of under this scheme.

10. First Trade Discount = 0.20 x 2,500 = PhP500
Initial Discounted Price = 2,500 – 500 = PhP2,000
or
Initial Discounted Price = 0.80 x 2,500 = PhP2,000
Second Trade Discount = 0.10 x 2,000 = PhP200
Second Discounted Price = 2,000 – 200 = PhP1,800
or
Second Discounted Price = 0.10 x 2,000 = PhP1,800

11. Last Trade Discount = 0.05 x 1,800
= PhP90
Total Trade Discount = 500 + 200 + 90
= PhP790
The distributor will be able to avail of
a total of PhP790 of trade discounts if
he purchases a minimum of 250 pairs
of shoes.

12. Equivalently, if distributor purchases a minimum
of 250 pairs of shoes, he will pay an amount of
Final discounted price = (1 – 0.05)x(1 – 0.10)x(1 0.20)x2,500
= 0.95 x 0.90 x 0.8 x 2,500
= 0.684 x 2,500
= PhP1,710 for each pair of shoes.
Total discount = 2,500 – 1710 = PhP790

13. Is this the same as a 35% single trade discount?
Trade Discount = 0.35x2,500 = PhP875
Note that the total trade discount availed of
by the distributor did not amount to this
much, but lower. A trade discount series of
20/10/5 is not equivalent to a 35% single
trade discount

14. To compute the equivalent single trade
discount of 20/10/5,
Single Trade Discount Rate Equivalent
=
790
2500
= 0.316 = 31.6%
The trade discount series 20/10/5 is only
equivalent to a single trade discount of
31.6%, not 35%.

15. Alternate solution:
Single Trade Discount Rate Equivalent
= 1 - (1-0.05) x (1-0.10) x (1-0.20)
= 1 - 0.95 x 0.9 x 0.8
= 1 - 0.684
= 0.316
= 31.6%

16. 1. A manufacturer sells kayaks to dealers
for Php 94,500 with discounts of
40/10/5.
a. Determine the net price of a kayak.
b. How much is the total trade discount?
c. What is the equivalent single trade
discount for this transaction?
Seatwork; Solve the given problem