Chain Discounts: Often retailers are
provided multiple discounts from wholesalers/ manufacturers.
These multiple discounts are called chain discounts and
are applied sequentially ( one after the other). The two
standard ways these multiple discounts are given is
demonstrated:
- 30% less 20% less 5%
- 30/20/5
|
(%
symbol is not used in 30/20/5; but, in calculations .30,
.20 and .05 must be used) |
The consideration for chain
discounts is the same as for single discounts - find the net
price when a list price and chain discounts are given. Many
students mistakenly assume the effect of chain discounts is
merely add the discounts to produce one discount rate which
would be applied as previously demonstrated. However, this is
not the case since the multiple discounts are applied sequentially.
An example will illustrate this difference.
Example
(Chain Discounts): Find the net price for an item
with a list price of $1000 and chain discounts 30/20/5.
| Method
A: |
 |
To summarize using
the Tabular format as given previously:
| |
% |
$ |
| D |
.468 |
468 |
| NP |
.532 |
532 |
| LP |
1 |
1000 |
|
- 53.2%
is the NP% since
= .532
- Since
D and NP are complements,
D($) = 468, D(%) = 46.8%
|
|
- Applying
the chain discounts 30/20/5
sequentially is equivalent to
applying 46.8% only once.
|
|
- 30%
+ 20% + 5% = 55%, sum of multiple
discounts. This does not
equal the equivalent single discount
rate of 46.8%.
|
Method
B: As previously
demonstrated, the use of complements is
very desirable in calculating the net
price, NP. Complements are extremely
useful for the chain discount
consideration as well.
Using the same example as above:
|
Method C: An even easier
and more effective method uses the
product of the complements as
illustrated using the same example.
|
See the
Sample Exam for a suggested tabular format
to facilitate the calculations for chain
discounts using Method C as well as
another numerical example. |
|
|
|
