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PERCENTAGE, BASE

and RATE

PERCENTAGE- refers to the calculations in which hundredths are used as a basis for
comparison.
- the amount that is a part of the base and is expressed in the same unit of
measure as the base.
- usually followed by is
BASE- the whole amount to which the relationships of the other amounts are compared.
- usually follows of
RATE- indicates the relationship of the part to the base. (%)

P=BxR

RATIO and PROPORTION

RATIO- expresses a comparison or relationship between two or more quantities.

a:b

or

a/b

PROPORTION- a statement of the equality of two ratios.

extremes

a:b=c:d
means

or

a/b = c/d

CHAPTER 2

TRADE DISCOUNT a percentage reduction in price of a merchandise


granted by a manufacturer or a wholesaler to the retailer.
- subtracted from the list price to get the net price.

CASH DISCOUNT calculated separately from trade discounts.


the

- an amount of the net price that is deduction from the net price if
bill is paid on or before a specified time period.

TRADE DISCOUNTS
REASONS WHY THEY GIVE TRADE DISCOUNTS:
a. Adjust list price to prevailing market prices.
b. Secure the trade of desirable customers
c. Attract retailers to buy in large quantities

LIST PRICE TRADE DISCOUNT = NET PRICE


- the price the retailer
actually pays for the
merchandise.

SUCCESSIVE TRADE DISCOUNTS


- The first discount is based on the list price; the second, on the remainder after
deducting the first discount; the third, on the remainder after deducting the
first two discounts; and so on.

SINGLE EQUIVALENT TRADE DISCOUNT RATE (SETDR)


- Can be done by subtracting each trade discount rate from 100%; then
multiplying the results together to obtain the overall net price rate (NPR).
- 100% less NPR equals overall trade discount rate.

CASH DISCOUNT
- An amount or a percentage of the net price that is deducted from the net price
if the bill is paid on or before a specified time period called the discount
period.

e.o.m.-

end of month

r.o.g.-

discount period begins upon the receipt of the goods by the buyer.

c.o.d.-

cash on delivery. Payment would have to be made upon delivery of the goods.

* If the invoice is dated late in the month such as 26th to 31st, and marked 15 e.o.m., the
discount period extends to the 15th day of the second upcoming month.

CHAPTER 3
PRICING THE MERCHANDISE

SELLING PRICE = COST MARK-UP


MARK-UP

= operating expenses + net profit final adjustment

GROSS PROFIT- is made up of the overhead or operating expenses and the net profit.
NET PROFIT- is the amount of money the retailer wants to keep for the business.

MARK- UP BASED ON COST

SELLING PRICE = COST MARK-UP


= COST x MARK-UP RATE
MARK-UP RATE =

MARK-UP
X 100%
COST

MARK-UP BASED ON SELLING PRICE

SELLING PRICE = COST MARK-UP


= SELLING PRICE X MARK-UP RATE

MARK-UP RATE=
MARK-UP
X 100%
SELLING PRICE

MARK-DOWN- the amount of reduction in the price of the merchandise.

* To attract customers and recover cost by reason of overbuying, poor pricing,


out-dated and worn-out appearance of merchandise or possible failure to forecast
demand accurately.

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