Use the trade discount system shown in the table to calculate the cost of 500 lbs of product if the retail price is $5 per pound.
| Trade Discount |
| --- |
| 0-100 lbs | 5 %
| 101-400 lbs | 15 %
| 401+ lbs | 30 %
Answer (2)
The cost of 500 lbs of the product, after applying the trade discount of 30%, is $1,750. This is calculated by first determining the total retail price of $2,500 and then subtracting the discount of $750. Thus, the final cost is 1750 .
;
Calculate the total retail price: 5 × 500 = 2500 .
Determine the discount rate: 30% (0.30).
Calculate the discount amount: 2500 × 0.30 = 750 .
Calculate the final cost: 2500 − 750 = 1750 . The final cost is 1750 .
Explanation
Understanding the Problem We are given a trade discount system and asked to calculate the cost of 500 lbs of a product with a retail price of $5 per pound. The discount system provides different discount rates based on the quantity purchased. For quantities over 401 lbs, the discount is 30%.
Calculating Total Retail Price First, we calculate the total retail price of the 500 lbs of product. This is simply the price per pound multiplied by the number of pounds: 5 × 500 = 2500
Determining the Discount Rate Next, we determine the applicable discount rate. Since we are purchasing 500 lbs, and 500 > 401, the applicable discount rate is 30%, or 0.30.
Calculating the Discount Amount Now, we calculate the discount amount. This is the total retail price multiplied by the discount rate: 2500 × 0.30 = 750
Calculating the Final Cost Finally, we calculate the final cost by subtracting the discount amount from the total retail price: 2500 − 750 = 1750
Final Answer Therefore, the cost of 500 lbs of the product after applying the trade discount is 1750 .
Examples
Trade discounts are commonly used in business to encourage larger purchases. For example, a construction company buying lumber might receive a trade discount based on the total volume of lumber purchased. This helps reduce costs for the company and incentivizes them to buy more from the supplier. Understanding how to calculate these discounts is essential for managing budgets and making informed purchasing decisions.
