PLEASE HELP!!!!
Custom Greetings places an order for 250 reams of card stock paper. Its supplier offers a chain discount on the paper of 25/15. The paper has a list price of $3 per ream. What is the trade discount amount? Round the answer to 2dp.
A - $187.50
B - $271.88
C - $84.38
D - $356.26
Answers
Answer:
B. $271.88
Step-by-step explanation:
Chain discounts, also called series discount or multiple discount refer to a number or series of discounts that apply to list or catalog price of the same product.
The chain discount is usually given by a business for numerous reasons like; buying in bulk, making an extra purchase, on specific products and/or buying at a specific time of the year.
Here is how to calculate the trade discount from a chain discount:
A chain discount of, for example, 20% and 5% can be represented as 20/5.
Step 1: This means that you calculate 20% of the list price and minus from this list price. This will give you the first discounted price.
Step 2: Calculate 5% of the new discounted price and subtract it from the discounted price. This net price will be discounted price.
⇒ The trade discount is calculated by adding the first discount and the second discount.
I hope this introduction gives you an idea on what chain discount is and how to calculate the trade discount.
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Let us now calculate the trade discount for the question given:
The trade discount is 25/15. That means a discount of 25% then another discount of 15% on the price of the reams.
Step 1: 25% of $3
25/100 × $3 = $0.75
The first discount is $0.75
Step 2: The first net price = $3 - $ 0.75 = $2.25
Step 3: The second discount is 15% of $2.25
15/100 × 2.25 = 0.3375
Step 4: Total discount is first discount plus second discount
$ 0.3375 + $ 0.75 = $ 1.0875
The trade discount per ream is $ 1.0875
Therefore the trade discount amount for the 250 reams:
$1.0875 × 250 = $271.875
271.875 to 2 decimal places
= $271.88