How to calculate cash discount and trade discount

Purpose of Assignment

The purpose of this assignment is to provide students an opportunity to apply the concepts of trade and cash discounts covered in Ch. 8 to integrated case studies.

Assignment Steps

Resources: Trade and Cash Discount Cases Excel® Template

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Complete the two Excel® cases located in the template.8-1 Single Trade Discounts Learning Outcomes 1. Find the trade discount using a single trade discount rate; find the net price using the trade discount. 2. Find the net price using the complement of the single trade discount rate. Most products go from the manufacturer to the consumer by way of the wholesale merchant (wholesaler or distributor) and the retail merchant (retailer). Product flow Manufacturer → Wholesaler → Retailer → Consumer Price flow Consumer → Retailer → Wholesaler → List price Net price Net price Discount off list Discount off list $56 $40 30% off list 50% off list $80 Manufacturers often describe each of their products in a book or catalog that is made available to wholesalers or retailers. In such catalogs, manufacturers suggest a price at which each product should be sold to the consumer. This price is called the suggested retail price, the catalog price, or, most commonly, the list price. When a manufacturer sells an item to the wholesaler, the manufacturer deducts a certain amount from the list price of the item. The amount deducted is called the trade discount. The wholesaler pays the net price, which is the difference between the list price and the trade discount. Likewise, the wholesaler discounts the list price when selling to the retailer. The discount rate that the wholesaler gives the retailer is smaller than the discount rate that the manufacturer gives the wholesaler. The consumer pays the list price. Suggested retail price, catalog price, list price: three common terms for the price at which the manufacturer suggests an item should be sold to the consumer. Trade discount: the amount of discount that the wholesaler or retailer receives off the list price, or the difference between the list price and the net price. Net price: the price the wholesaler or retailer pays or the list price minus the trade discount. Discount rate: a percent of the list price. The trade discount is not usually stated in the published catalog. Instead, the wholesaler or retailer calculates it using the list price and the discount rate. The discount rate is a percent of the list price.