A $65 kitchen knife set is sold in bulk to your store for $52. Calculate the trade discount rate.
Answer (1)
Calculate the trade discount: $65 − $52 = $13 .
Calculate the trade discount rate: $65 $13 × 100 .
Simplify the expression: 0.2 × 100 = 20 .
The trade discount rate is 20% .
Explanation
Understanding the Problem We are given that a kitchen knife set has a list price of $65 and is sold to a store for $52. Our goal is to find the trade discount rate.
Calculating the Trade Discount First, we need to calculate the trade discount amount. This is the difference between the list price and the selling price. So, we subtract the selling price from the list price: Trade Discount = List Price − Selling Price Trade Discount = $65 − $52 = $13
Calculating the Trade Discount Rate Next, we calculate the trade discount rate. This is the trade discount amount divided by the list price, expressed as a percentage. So, we divide the trade discount by the list price and multiply by 100: Trade Discount Rate = List Price Trade Discount × 100 Trade Discount Rate = $65 $13 × 100 Trade Discount Rate = 0.2 × 100 = 20
Final Answer Therefore, the trade discount rate is 20%.
Examples
Trade discounts are common in business. For example, a clothing store might receive a trade discount on bulk purchases from a manufacturer. Understanding trade discounts helps businesses determine their profit margins and pricing strategies. If a store buys items for $80 after a trade discount and sells them for $100, the store makes a profit of $20 per item. Knowing the trade discount rate allows the store to accurately assess its costs and set competitive prices.
