Discount Pricing Discounts and Allowances Cash discounts Quantity

Discount Pricing

Discounts and Allowances • • • Cash discounts Quantity discounts Trade discounts Seasonal discounts Special allowances

Cash Discounts • Offered to encourage quick payment • Terms 2/10, n/30 means – Pay within 10 days of the date of the invoice, and you may deduct 2% off the price – Otherwise, net or n is due within 30 days of the date of the invoice

Quantity Discounts • • Large orders receive bigger discounts The more you buy, the less you pay Could be the same item or different items Example: – 1 -24 = $1. 00 each – 25 -48 = $. 95 each – 49 -72 = $. 90 each

Employee Discounts • Sometimes given as a perk for being employed at that business • Usually varies between 10 and 30% • Can be a certain dollar figure

Assignment • Discount Pricing Worksheet 2 • Employee discount problems (marketing math workbook p. 92)

Trade Discounts • Not really discounts, but a way to quote prices • Granted to wholesalers and retailers for performing for that trade or company • Multiple the price by the discount amount and subtract from the price • $40 X 10% = $4 discount; Price is $40 -$4 = $36

Series Discounting • Sometimes trade discounts are offered in a series. • For example, if a wholesaler was offered trade discounts of 20% and 10%, you would first determine the 20% and then take 10% off of that amount. • It would not be a 30% discount total.

For example • Price of a product is $5, 700 and the trade series discounts are 20% and 10% • Take 20% off – Either do 20% X 5700 = 1140, and then 57001140=4560 – OR 80% X 5700 = 4560 • Then, take 10% of 4560 • What is the final amount due for the product?

Seasonal Discounts • Purchased outside the customary season • Reduce costs by selling at lower price instead of paying the cost for warehousing • Figured the same as a trade discount

Promotional Discounts and Allowances • To wholesalers and retailers – Willing to advertise or promote a manufacturer’s product – Could be free merchandise to sell or a price reduction in the cost • For instance, a retailer offers to do an aisle display of the product in exchange for a discount or the manufacturer offers a shelving allowance. • Divide the dollar discount by the original price. The answer will be a decimal. Change the decimal to a percentage.

Figuring a Promotional Discount • • • $10, 000 Price $250 discount Divide the discount amount by the price 250/10, 000 =. 025 (convert to percentage) 2. 5%

For example • Suppose you are a retailer, and the manufacturer offers you a 10% promotional allowance for shelving their product prominently. You buy $30, 000 worth of the merchandise. What is your cost? • Suppose you are a retailer and it is cheaper to discount your valentine candy than it is to send it back to your supplier. You price candy hearts that were $1. 00 at. 65. What is the promotional discount you are offering?

Promotional Discounts and Allowances • Offered to consumers also in the form of – Rebate – Trade Ins – Coupons

Assignment • Students should complete – Practice 7 on p. 579 – Practice 8 on p. 581 – Handout Problems (from MM workbook) • P. 89 Series discounts #95, 96, 97, 98 • P. 91 Promotional discounts #103 (net amount payable only) • P. 91 #105