A $50 thermometer is sold in bulk to your store for $42. Calculate the trade discount rate.
Answer (2)
The trade discount rate for the thermometer is 16%, calculated by taking the discount amount of $8 and dividing it by the list price of $50, then multiplying by 100. This shows how much discount the store receives when purchasing in bulk. A 16% discount helps the store maintain a profit margin when it sells the thermometer.
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Calculate the discount: $Discount = List Price - Selling Price = $50 - $42 = $8.
Calculate the trade discount rate: T r a d eD i sco u n tR a t e = ( D i sco u n t / L i s tP r i ce ) × 100 = ( 8/50 ) × 100 .
Simplify the expression: T r a d eD i sco u n tR a t e = 0.16 × 100 = 16 .
The trade discount rate is 16
Explanation
Understanding the Problem The problem states that a thermometer with a list price of $50 is sold to a store for $42. We need to find the trade discount rate.
Defining Variables Let's define the variables:
L = List price = $50
S = Selling price = $42
r = Trade discount rate (what we want to find)
Calculating the Discount The discount amount is the difference between the list price and the selling price: D i sco u n t = L − S = 50 − 42 = 8 The discount is $8.
Calculating the Trade Discount Rate The trade discount rate is the discount amount divided by the list price, expressed as a percentage: r = L i s tP r i ce D i sco u n t × 100 = 50 8 × 100 r = 0.16 × 100 = 16 The trade discount rate is 16%.
Final Answer Therefore, the trade discount rate is 16%.
Examples
Trade discounts are common in business-to-business transactions. For example, a manufacturer might offer a trade discount to a retailer to encourage them to stock and sell their products. If a clothing store buys shirts from a wholesaler who offers a 20% trade discount on a list price of $25 per shirt, the store pays $20 per shirt. This helps the store maintain a profit margin when they sell the shirts to consumers.
