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13-6 Merchandising CH 13]

List price x ∫D1-n = Net Price

$800 list price (or invoice price) x ∫(15%, 10%, 5%) = Net Price
$800 list price (discounts as decimals) x (1.00 − 0.15) x (1.00 − 0.10) x (1.00 - 0.05) =
$800 x (0.85) x (0.9) x (0.95) =
$800 x 0.72675 = $581.40
Net Price Equivalent Rate: a decimal
In this case the single equivalent discount rate, 0.72675,
which is a rate that is equal to the series discount; a process of multiplication and not addition
as with the Standard Discount. This equivalent rate then is applied to the differing list prices
of different items being sold with the same discount. Mechanically it is a process of how the
multiplication is enacted. In our example the discounts are multiplied together to arrive at
0.72675 and that equivalent discount is then multiplied to the list price.

(0.85) x (0.9) x (0.95) = 0.72675
Net Price Equivalent Rate: a decimal
Comparing the standard discount, where addition of
discounts is used, to the series discount where the discounts are a product of multiplication,
you will note that the standard discount is larger than the series discount. This occurs
because the series discount is a discount taken against the remainder of the list price as
opposed to the standard discount which is taken against the original whole list price.

Example A: List price of $800, and Standard Discount of 15%, 10% and 5%. Calculate
total discount and the net price.
Solution algorithm:

List price x D1-n = net price

$800 list price (or invoice price) x (100% − (15%, 10%, 5%) ) =
$800 list price (discounts as decimals) x (1.00 − (0.15 + 0.10 + 0.05) ) =
Total Discount = 30%
$800 x (1.00 – 0.30) =
Net Price
$800 x 0.70 = $560

Example B: List price of $800, and Series Discount of 15%, 10% and 5%. Calculate total
discount and the net price.
Solution algorithm:

List price x ∫D1-n = net price

$800 list price (or invoice price) x ∫( 15%, 10%, 5% ) = Net Price
$800 list price (discounts as decimals) x (1.00 − 0.15) x (1.00 − 0.10) x (1.00 - 0.05) =
Series Discount (Net Price decimal)
$800 x (0.85) x (0.9) x (0.95) =

Net Price decimal Net Price
$800 x 0.72675 = $581.40
Series Discount

Single Equivalent Discount Rate : 100% — 72.675% = 27.325%

Comparing Example A to Example B for discount percentage and net price to buyer.

Discount Net
Percent Price
Example A: 30.0% $560.00 Higher discount and lower price
Example B: 27.325% $581.40 Lower discount and higher price

Note that in both examples the buyer and seller are each benefited. The buyer is benefited
as they pay less for their purchase and the seller is benefited in that the product is sold. There

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