PEDRO S.

TOLENTINO MEMORIAL INTEGRATED SCHOOL

SENIOR HIGH SCHOOL

BUSINESS MATHEMATICS

Name of Learner: ___________________________________________________Grade Level: ___________________

Section: _____________________________ Date: _________________________ Score: _________________________

TRADE DISCOUNT
Every business aims to have profit. A trading concern tries to buy merchandise at the lowest possible cost
in order to maximize its profits. It is common practice to offer discounts on the price of merchandise for
sale in order to attract customers.

A manufacturer sells its products in bulk to a wholesaler. In turn, the wholesaler sells in smaller quantities
to retailers who sell the product to the customers.

Retailers buy from the manufacturers at a cost called the net price. Net Price refers to the amount of one
item on an invoice or to the net total of all the items on their invoice. The invoice is also known as the
bill.

The retailers have to sell their items at a higher price, when they determine on their own. However, the
producers may recommend to the retailers the price which should be charged to the costumers. This
manufacturer’s recommend price is known as the list price.

The list price, LP, is always higher than the net price NP. The difference between the list price and the net
price is called the trade discounts TD. It is the discount offered by a seller to induce trading. It is a large
deduction given to wholesalers and manufacturers to enable them to make bigger profits.

Trade Discount TD = List Price LP – Net Price NP

That is,

The rate of trade discount RTD can be computed using the list price as the base and the amount of trade
discount as the percentage.

Trade Discount
That is, Rate of Trade Discount RTD = List Price

EXAMPLES

1. The costumer buys a cassette tape recorder for a net price of Php 2 100. The list price is Php 2
800. Compute the:
a. Trade Discount b. Rate of trade Discount

Given: Net Price = Php 2 100

List Price = Php 2 800

ANGELICA M. PEREZ
SHS- MATH TEACHER 35
 PEDRO S. TOLENTINO MEMORIAL INTEGRATED SCHOOL
SENIOR HIGH SCHOOL

Solution:

a. Trade Discount TD
TD = LP – NP
TD = 2 800 – 2 100 = Php 700
b. Rate of Trade Discount
TD
RTD =
LP

700
RTD =
2800

RTD = 0.25 or 25%

The rate of trade discount is computed using the list price. If the equation is cross multiplied, we have
TD = RTD x LP
TD = LP – NP
NP = LP – TD
NP = LP- RTD
NP = LP (1-RTD)

2. The list price of brand new adding machine is Php 65 950 subject to 25% trade discount.
Compute the following:
a. Net Price b. Trade Discount

Given: LP = Php 65 950

RTD = 25%

Solution:

a. Net Price
NP = LP (1-RTD)
NP = Php 65 950 (1-0.25)
NP = Php 49 462.50

b. Trade Discount
TD = LP – NP
TD = Php 65 950 –Php 49 462.50
TD = Php 16 487.50

ANGELICA M. PEREZ
SHS- MATH TEACHER 36
 PEDRO S. TOLENTINO MEMORIAL INTEGRATED SCHOOL
SENIOR HIGH SCHOOL

At the end of the lesson, the learner should be able to solve the Trade Discount given the
LEARNING Net Price and the List Price.
COMPETENCY

Activity 1: Trade Discount

Directions: Solve the following problems completely. Show the formulas and all the pertinent solutions
on this sheet.
1. A computer printer was priced at Php 9 800 less 8% trade discount. Find the following:
a. Net Price
b. Trade Discount
2. A businessman bought a furniture with a selling price of 4 590 subject to 15% trade discount. Find
the following:
a. Net Price
b. Trade Discount
3. Angel’s law office bought a typewriter with a list price of Php 3 850 for Php 3 250. Determine:
a. Trade Discount
b. The Rate of trade Discount
4. A shoe store bills a retailer Php 14 900 for leather shoes, subject to 15% trade discount. Find the
following:
a. Trade Discount
b. Net Price
5. Perez auto supply sells spare parts for Php 8 900, subject to 15% trade discount. Calculate the
following:
a. Trade Discount
b. Net Price

MULTIPLE TRADE DISCOUNT

To dispose of their goods quickly, wholesalers may offer successive trade discount rates which we call
discounts in series.
If a manufacturing concern would give a 25% and 20% trade discount on its product this does not mean
that the total discount rate is 45%. As a discount series, it is simply means that the first discount of 25% is
applied to the original list price and the second discount of 20% to the balance of the original list price
and the first discount price. The net price in this situation can be obtained in different ways granting that
the list price and the discount rates are known.

SINGLE EQUATION METHOD

One of the methods in computing the net price of an item subject to multiple trade discounts is the single
equation method, if there are two discounts rate RTD1 and RTD2 then the computing formula for the net
price is
NP = LP (1- RTD1)(1-RTD2)

If there are three discount rates, then the formula will simply be extended to
ANGELICA M. PEREZ
SHS- MATH TEACHER 37
 PEDRO S. TOLENTINO MEMORIAL INTEGRATED SCHOOL
SENIOR HIGH SCHOOL

NP = LP (1- RTD1)(1-RTD2)(1-RTD3)

EXAMPLES
1. The list price of a television set is Php 8 950 subject to 15% and 10% discounts. Compute the net
price.

Given: LP = Php 8 950

RTD1 = 15% RTD2 = 10%
Solution:
Find NP
NP = LP (1-RTD1)(1-RTD2)
NP = Php 8 950 ( 1- 0.15)(1-0.10)
NP = Php 8 950 (0.765)
NP = Php 6 846. 75
2. A wrist watch has a list price of Php 8 950 subject to 15% and 10% and 5% trade discounts.
Compute the net price.
Given: LP = Php 8 950
RTD1 = 15% RTD2 = 10% RTD3 = 5%
Solution:
Find NP
NP = LP (1-RTD1)(1-RTD2)
NP = Php 8 950 ( 1- 0.15)(1-0.10) (1-0.05)
NP = Php 8 950 (0.72675)
NP = Php 6 504. 41

Computing the net price using the single discount method, subject to RTD1, RTD2,…RTDk trade
discounts can be generalized as

NP = LP (1-RTD1)(1-RTD2)…(1-RTDk)

ANGELICA M. PEREZ
SHS- MATH TEACHER 38
 PEDRO S. TOLENTINO MEMORIAL INTEGRATED SCHOOL
SENIOR HIGH SCHOOL

SINGLE RATE EQUIVALENT

METHOD

In the single equation method, a number of discounts is not shown since the net price is computed
directly. In the single rate equivalent method, all the discounts are equated into single discount
rate. Once the single discount rate is known, the net price can be computed NP = LP (1-RTD).

The single rate equivalent of two discounts rate RTD1 and RTD2 can be computed using the
formula:
SRE = 1 – (1-RTD1)(1-RTD2)

If there are discount rates say RTD1, RTD2 and RTD3, then the single rate equivalent is given by
SRE = 1 – (1-RTD1)(1-RTD2)(1-RTD3)

EXAMPLES

1. A television set with list price of Php 8 500 is subject to 15% and 10% trade discounts. Find
the following:
a. Single Rate Equivalent SRE to the two trade discounts
b. Net Price NP
c. Trade Discount TD
Given:
LP = Php 8 500
RTD1 = 15%
RTD2 = 10%

Solution:
a. Single Rate Discount SRE
SRE = 1- (1-RTD1)(1-RTD2)
SRE = 1- (1-0.15)(1-0.10)
SRE = 1 – 0.765
SRE = 0.235 or 23.5%

b. Solving for the net price

NP = LP (1-RTD)
NP = Php 8 500 (1-0.235)
NP = Php 6 502. 50

c. Solving for trade discount

ANGELICA M. PEREZ
SHS- MATH TEACHER 39
 PEDRO S. TOLENTINO MEMORIAL INTEGRATED SCHOOL
SENIOR HIGH SCHOOL

TD = Php 8 500 – Php 6

502.50
TD = Php 1 997.50

2. The list price of a brand new 21 inches Sony colored television set Php 24 500 subject to 15%,
10% and 5% discounts.

Find the
a. Single Equivalent Rate
b. Net Price
c. Trade Discount

Solution:
a. Single Rate Equivalent

SRE = 1- (1-RDT1)(1-RTD2)(1-RTD3)
SRE = 1 – 0.73
SRE = 0.27 or 27%

b. Net Price
NP = LP (1-RTD)
NP = Php 24 500 (1-0.27)
NP = Php 17 885

c. Trade Discount
TD = LP –NP
TD = Php 24 500 – 17 885
TD = Php 6 615

3. The list price of an equipment is Php 15 680 subject to 10% trade discount. What should
additional discount be given to bring down the price to Php 12 180?

Given:
LP = Php 15 680
RTD1 = 10%
NP = Php 12 180

Solution:

We are required to find the second discount rate RTD2

NP = LP (1-RTD1)(1-RTD2)
Php 12 180 = Php 15 680 ( 1-0.10)(1-RTD2)
0.776785714 = 0.90 (1-RTD2)
0.7768 = 0.90 – 0.90 RTD2
0.90RTD2 = 0.90 – 0.7768

ANGELICA M. PEREZ
SHS- MATH TEACHER 40
 PEDRO S. TOLENTINO MEMORIAL INTEGRATED SCHOOL
SENIOR HIGH SCHOOL

0.90RTD2 = 0.1232
RTD2 = 0.1369 or 13.69%

We can derive the formula for the second rate from the equation

NP = LP (1-RTD1)(1-RTD2)

NP
RTD2 = 1-
LP(1−RTD 1)

At the end of the lesson, the learner should be able to solve the Single Rate Equivalent, net
LEARNING price and Trade discounts
COMPETENCY

Activity 2: Directions: Answer as directed. Show all pertinent solutions.

1. A merchandise worth Php 29 950 is subject to trade discount of 15% and 10%. Find
the following:
a. Single Rate Equivalent of the Discounts
b. Net Price
c. Trade Discount
2. A retailer buys an item worth Php 24 560 is subject to trade discounts of 10% and
5%. Find the following:
a. Single Rate Equivalent of the Discounts
b. Net Price
c. Trade Discount
3. A scientific calculator is worth Php 1 595 subject to 10%, 8% and 5% trade
discounts. Compute the following:
a. Single Rate Equivalent of the Discounts
b. Net Price
c. Trade Discount
4. A wrist watch has a list price at Php 19 950 subject to 10%, trade discount.
a. What would additional discount rate bring the price down to Php 15 000?
b. Single Rate Equivalent of the Discounts
c. Net Price
5. The list price of a television set is Php 29 560 subject to 9% trade discount. Find
the:
a. What would additional discount rate bring the price down to Php 23 000?
b. Single Rate Equivalent of the Discounts
c. Trade Discounts

ANGELICA M. PEREZ
SHS- MATH TEACHER 41
 PEDRO S. TOLENTINO MEMORIAL INTEGRATED SCHOOL
SENIOR HIGH SCHOOL

6. A brand new adding machine was

priced at Php 36 500 subject to 8%
trade discount. A buyer was able to buy the said adding machine with an additional
5% trade discount. Find the following:

a. What would additional discount rate bring the price down to Php 23 000?
b. Single Rate Equivalent of the Discounts
c. Trade Discounts

7. Bookmark offers 10% trade discount to retailers. If a math book priced at Php 395
was sold at Php 300, compute:
a. Additional Trade Discount
b. Single Rate Equivalent

ANGELICA M. PEREZ
SHS- MATH TEACHER 42