Use the trade discount system shown in the table to calculate the cost of 1560 lbs of product if the retail price is $[tex]$25[/tex] per pound.
| Trade Discount |
| --- |
| 0-100 lbs | [tex]$0 \%$[/tex] |
| 101-400 lbs | [tex]$10 \%$[/tex] |
| 401+ lbs | [tex]$25 \%$[/tex] |
$[?]
Answer (1)
Calculate the total retail price: $25 × 1560 = $39000 .
Determine the discount rate: 25% since 1560 lbs > 400 lbs.
Calculate the discount amount: $39000 × 0.25 = $9750 .
Calculate the total cost: $39000 − $9750 = $29250 .
Explanation
Calculate Total Retail Price First, we need to determine the total retail price of the product without any discounts. The retail price per pound is $25, and we are purchasing 1560 lbs of the product. To find the total retail price, we multiply these two values:
Formula for Total Retail Price T o t a l R e t ai l P r i ce = R e t ai l P r i ce p er P o u n d × Q u an t i t y
Calculating Total Retail Price T o t a l R e t ai l P r i ce = $25 × 1560 = $39000
Determine Discount Rate Next, we determine the applicable discount rate. According to the table, if we purchase 401+ lbs of the product, we receive a 25% discount. Since we are purchasing 1560 lbs, which is more than 401 lbs, the discount rate is 25%.
Calculate Discount Amount Now, we calculate the discount amount. We multiply the total retail price by the discount rate:
Formula for Discount Amount D i sco u n t A m o u n t = T o t a l R e t ai l P r i ce × D i sco u n t R a t e
Calculating Discount Amount D i sco u n t A m o u n t = $39000 × 0.25 = $9750
Calculate Total Cost Finally, we calculate the total cost after applying the discount. We subtract the discount amount from the total retail price:
Formula for Total Cost T o t a l C os t = T o t a l R e t ai l P r i ce − D i sco u n t A m o u n t
Calculating Total Cost T o t a l C os t = $39000 − $9750 = $29250
Final Answer Therefore, the cost of 1560 lbs of the product after applying the trade discount is $29250.
Examples
Trade discounts are commonly used in business to encourage larger purchases. For example, a local bookstore might offer a 20% discount on orders over 50 books to schools. If a school orders 100 books priced at $15 each, the original cost would be $1500, but with the discount, the school would only pay $1200, saving $300. This helps the bookstore sell more books and allows the school to save money.
