TRADE DISCOUNTS. 35. Trade discounts are reductions made by manufacturers, jobbers, or merchants from their list, or catalog, prices. In many branches of business, manufacturers and dealers list their goods at a fixed price for each article, and allow a rate of discount on orders of a certain amount, a second discount on orders of larger amount, and perhaps a third discount on still larger orders. If it becomes necessary to raise or lower the price of the goods, the rate of discount is decreased or increased, the list price remaining the same. The system of discounts thus saves the expense of publishing a new price list every time prices change. "Terms: 60 days net; Even when no discount 36. Merchandise is frequently sold at time prices; that is, payment is to be made in 30, 60, or 90 days after date of sale, and a certain rate of discount is allowed if payment is made at an earlier date. Business houses usually make announcements such as the following upon their bill heads: "Terms: 4 mo., or 5% 60 days;" 30 days, 3% off; 10 days, 5% off." is stated in the terms, sellers will usually deduct the legal interest for the time remaining, if the payment is made before it becomes due. Thus, if a payment due in 3 months is made 1 month after the sale, the seller should deduct the interest for the remaining 2 months. 37. Trade discounts are computed by the rules of percentage, the list price of the goods being the base. When several discounts are allowed, the first discount is computed on the list price, the second is computed on the remainder after deducting the first discount, and so on, each remainder being regarded as a base for the computation of the next discount. The several discounts, if there are more than one, form a discount series. 38. Rule. To find the selling price, multiply the list price by the rate, and subtract the discount thus obtained from the list price. If there is a discount series, compute the second discount, using the first remainder as a base, and subtract the discount from the remainder. Repeat the process, using each successive remainder as a base for computing the next discount. The last remainder is the selling price. EXAMPLE 1.-The list price of an article is $62.50 and a discount of 40% is allowed; what is the selling price? Second Method.-Since the list price is the base, and the selling price is the base less the percentage, i. e., the difference, the selling price may be found by applying the rule of Art. 20. Thus, Selling price = $62.50 X (1.40) = $37.50. Ans. EXAMPLE 2.-On a bill of goods amounting to $720, discounts of 30%, 10%, and 5% are allowed; what is the selling price? Second Method.-Regarding $720 as divided into 100 parts, the first discount of 30% leaves 100 - 30 = 70 parts. The second discount of 10% is computed on the remainder after the first discount has been deducted; that is, the second discount is 10% of 70 parts. Hence, the remainder after the second discount has been deducted is 70 X (1-.10) = 63 parts. Similarly, the remainder after the third discount has been deducted is 63 × (1 − .05) = 59.85 parts, or 59.85% of $720. Therefore, Selling price $720 X .5985 $430.92. Ans. = Ordinarily, when applying this method, the work would be as follows: $720 × (1.30) × (1.10) × (1 − .05) 39. The discounts usually allowed are aliquot parts of 100%, and the labor of computation may be shortened by using the fractions corresponding to the rates of discount. EXAMPLE. The gross amount of a bill of hardware is $640, and discounts of 25%, 10%, and 5% are allowed; what is the net amount of the bill? is divided by 20. The final remainder, $410.40, is the net amount or selling price. 40. When a discount series is allowed, business men usually reduce the series to an equivalent single discount; if there is a large number of sales, much labor of computation is saved by using the equivalent discount rather than the series. 41. Rule. To reduce a discount series to an equivalent single discount, subtract each rate of discount from 1, and multiply the remainders together. Subtract the product from 1, and the remainder will be the single discount. (See example 2, second method, Art. 38.) EXAMPLE 1.-What single discount on the gross price is equivalent to a discount series of 25%, 20%, and 10%? SOLUTION. 1 .25 .75; 1.20 : = .80; 1.10 = .90. EXAMPLE 2.-The cost of a line of goods is $350; what must they be marked to give a profit of 20% and allow a discount of 30% on the marked price? = $420. SOLUTION.-First Method.-The profit is $350 X .20 = $70; therefore, the actual selling price is $350 + $70 This is what remains after deducting 30% from the marked price. Since the 30% discount is computed on the marked price, that price must be the base, and the less price, $420, obtained by subtracting the discount, is the difference. According to the rule, Art. 22, base difference = Second Method.-Regarding the $350 as divided into 100 parts, 20 parts must be added to this in order to gain 20%; that is, the selling price must be 120 parts, or 120% of $350. Now, if a discount of 30% is to be allowed from the list price and leave a remainder of 120 parts, it is evident that 120 parts is the difference, and the list price is the base. According to rule, Art. 22, 42. = = 171 parts, or 171%. $350 × 1.71 =3 $600. Ans. Rule.-To find the price at which goods must be marked to insure a given profit after allowing a discount, or a discount series, add to the cost the profit required, and divide the sum by 1 minus the discount or equivalent single discount. EXAMPLE. The cost of manufacturing hats is $36 per dozen; at what price per dozen must they be marked that the manufacturer may realize 16% profit after allowing the trade discounts of 20% and 12%? SOLUTION.-First Method. - 16% = Profit = .80; 1 - .12 $36 × = $6; × .871 = .70. The equivalent single discount is 1 −.70 = .30. Marked $42 ÷ (1.30) $60 per doz. Ans. Second Method.-Selling price expressed as per cent. 43. Reduce the following discount series to equivalent single discounts: 1. A musical instrument is listed at $122 and discounts of 60% and 5% are allowed; what is the selling price? Ans. $46.36. 2. A bill of hardware is sold at the following discounts: $452.60 at 30% and 10%; $216 at 33}% and 5%; $137.50 at 20%; and $83.75 net. What is the total net amount of the bill? 3. Ans. $615.69. A bill of goods amounting to $836.72 was bought May 5, 1890, on the following terms: 4 months, or 5% off 30 days; how much would pay the bill June 4, 1890? Ans. $794.88. 4. A wholesale dealer sells books at discounts of 20% and 5%; what must he mark a set of books that cost him $24 in order to make 263% profit, after allowing discounts? Ans. $40. 5. Plows are bought at a discount of 40% from the list price; what per cent. is gained by selling them at the list price? Ans. 66%. 6. A wholesale dealer offers silks at $3.50 per yard, subject to a discount of 20%, 12%, and 10%; how many yards can be bought for $352.80? Ans. 160. 7. A suit of clothing is marked 50% off; by selling at this price the clothier loses 123% of the cost of the suit, which was $12. What was the marked price of the suit? Ans. $21. COMMISSION AND BROKERAGE. 44. Commission, or brokerage, is the sum paid an agent for transacting business for another person; as, for buying or selling merchandise or property, for collecting or investing money, etc. 45. The agent or party who transacts the business is called a commission merchant, or broker; the party for whom the business is transacted is called the principal. The term broker is applied to one who sells and buys stocks, bonds, bills of exchange, and money securities. 46. A consignment is a shipment of goods from one party to another; the party that ships the goods is called the consignor or shipper, and the party to whom they are shipped is called the consignee. 47. When goods are sold on credit, the agent charges an additional amount for guaranteeing the payment of the sale. This extra charge is termed guaranty. 48. The gross proceeds of a sale or collection is the total amount realized by the agent before deducting his commission and other expenses connected with the transaction. The net proceeds is the amount due the principal after the commission and all other charges have been deducted. 49. An account sales is a detailed statement made by the agent to his principal, showing the goods sold and the prices obtained, giving a list of the charges and expenses, and the net proceeds due the principal. The charges include freight, cartage, storage, insurance, inspection, advertising, commission, and guaranty. |