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)
Calculate the total retail price: 500 × $5 = $2500 .
Determine the applicable trade discount: 30% for 500 lbs.
Calculate the discount amount: $2500 × 0.30 = $750 .
Calculate the final cost: $2500 − $750 = $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 trade discount varies based on the quantity purchased.
Calculating Total Retail Price First, we need to calculate the total retail price before any discounts are applied. This is simply the price per pound multiplied by the number of pounds.
Total Retail Price Calculation The total retail price is calculated as: 500 lbs × $5 /lb = $2500
Determining the Trade Discount Next, we determine the applicable trade discount. According to the table, for quantities of 401 lbs or more, the trade discount is 30%. Since we are purchasing 500 lbs, the discount is 30%.
Calculating the Discount Amount Now, we calculate the discount amount by multiplying the total retail price by the discount percentage: D i sco u n t = $2500 × 0.30 = $750
Calculating the Final Cost Finally, we subtract the discount amount from the total retail price to find the final cost: F ina lC os t = $2500 − $750 = $1750
Examples
Trade discounts are commonly used in business to encourage larger purchases. For example, a store might offer a discount to customers who buy in bulk. Understanding how to calculate these discounts is essential for managing costs and pricing strategies. Imagine you are running a small business and need to purchase raw materials. Knowing how trade discounts work can help you negotiate better prices with your suppliers, ultimately increasing your profit margin. For instance, if you buy 500 lbs of material at $5 per pound but receive a 30% discount, you save $750 , making your business more competitive.
The total cost for 500 lbs of the product at $5 per pound after applying the 30% trade discount is $1750. This is calculated by first determining the total retail price of $2500, then calculating the discount amount of $750, and finally subtracting that from the retail price. Thus, the final cost is $1750.
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