Professional Documents
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• Trade discount is a deduction from the list price and it is usually given to buyers for the
following reasons:
• Retailers cannot take trade discounts on freight, returned goods, sales tax and so on.
• Trade discounts just only given to buy for large quantities for item.
• Net price is the price that the retailer pays after reduction in prices.
-Formulation:
= LP x r
-Formulation:
NP = LP(1 – r)
-Formulation:
Seminar 4/MAT112/bushra_fskm_uitm 2
• Cash discounts are credits or discounts applied to an invoice or bill, which are paid
within a specified period of time
• Cash discount is not given on transportation, returned goods, sales tax and so on.
-Example:
3/10,1/15,n/30 means:-
i) the customer is entitled to received a 3% discount if the bill is paid within 10 days from
ii) if 3% discount is missed, a 1% discount can be taken from day 11 to day 15 of invoice
date
iii) the full amount of price with no discount from day 16 to day 30
• Partial payment on an invoice – retailer pays only part of the invoice within the discount
period
-Formulation:
• Basic terms:
Retail price (R) / Selling price (SP) : the price at which item is sold.
Mark-up (M) / Gross profit : the difference between the retail price and the cost/ provide
Seminar 4/MAT112/bushra_fskm_uitm 4
: Formulation :-
R=C+M
Markdown (MD) : the difference between the old retail price and the new retail price/ the
: Formulation :-
Operating expenses (OE) : Any expenses of business operation such as wages, rent,
Breakeven price (BEP) : the retail price in which there is no gain and loss.
: Formulation :-
BEP = C + OE
Net profit (NP) : the amount left after deducting operating expenses from the mark-
up/gross profit.
markup
• i) Mark-up percent based on cost price, % M C = × 100%
cost
markup
ii) Mark-up percent based on retail price, % M R = × 100%
retail
markdown
• Markdown percent, %MD = ×100 %
old retail price
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• Profit and loss – possibilities : i) If gross profit > operating expenses, then net profit
exists, NP = +ve
exists, NP = -ve
exists , NP = 0
R = C + NP + OE
-when NP = 0 ,
R = C + OE
Example 1
The cost of a bag is RM15. What is the retail price if the mark-up is 15% of the cost price?
Example 2
A fruit seller buys 100kg of duku langsat for RM100. He finds that 20% of the duku langsat are
spoilt and throws them away. If he wants to have a 40% mark-up on the total cost, find the retail
price per kg of the duku langsat.
Example 3
A shirt that was previously sold for RM79.95 is now being sold for RM59. Find the markdown
percent.
Example 4
Given below is the quantity and regular price of a DVD player, which was sold at an electrical
store.
Items Regular retail price per unit
15 sets RM599
If the store made a net profit of 20% based on cost and the total operating expenses incurred
were 5% of the cost for each DVD player, calculate:
a) the cost of each DVD player,
b) the breakeven price for each DVD player.