A $20 t-shirt is sold in bulk to your store for $12. Calculate the trade discount rate.
Answer (1)
Calculate the discount amount: D i sco u n t = $20 − $12 = $8 .
Calculate the trade discount rate: T r a d e D i sco u n t R a t e = ( $20 $8 ) × 100 .
Simplify the expression: T r a d e D i sco u n t R a t e = 0.4 × 100 .
The trade discount rate is 40 % .
Explanation
Understanding the Problem We are given that the original price of a t-shirt is $20, and the bulk price is $12. We need to find the trade discount rate.
Calculating the Discount First, we calculate the amount of the discount by subtracting the bulk price from the original price: D i sco u n t = O r i g ina l P r i ce − B u l k P r i ce = $20 − $12 = $8
Calculating the Trade Discount Rate Next, we calculate the trade discount rate by dividing the discount by the original price and multiplying by 100: T r a d e D i sco u n t R a t e = O r i g ina l P r i ce D i sco u n t × 100 = $20 $8 × 100 = 0.4 × 100 = 40%
Final Answer Therefore, the trade discount rate is 40%.
Examples
Trade discount rates are commonly used in retail and wholesale businesses. For example, a store might buy items in bulk from a manufacturer at a discounted rate. Understanding how to calculate these discounts helps businesses determine their profit margins and pricing strategies. If a store knows it can buy a t-shirt for $12 and sell it for $20, calculating the discount rate helps them understand the financial benefits of this arrangement and plan their inventory accordingly.
