Page 43 - CalcBus_Flipbook

CH 4] Calculating Business 4-7

Practical Uses of Percentage Problems in Retail

Go shopping and you will encounter stores offering their goods at a discounted price.
Have you encountered sales with "15 percent off" and "half off"? These are advertised in
many forms to entice purchases. Thus it is critical to grasp the concepts of calculating the
amount reduced if they take a percentage away from of a base (the original offering price).
Imagine you're planning a trip to Buenos Aires, Argentina for two and have an offering
that's only valid for the off-season of travel that guarantees 50 percent off the ticket pricing.
On the other hand, you can travel during the busy season and experience this European
city of South America, but you can only find 30 percent discounts for those tickets.
If the off-season tickets cost $1425 (cost for two before the discount is applied) and the
on-season tickets cost is $825 before applying the 30% discount coupons, which would be
the better deal?
Based on the on-season tickets being reduced by 30 percent (30%), the final total cost
would be $578 (rounded up) while the cost for the off-season, being reduced by 50 percent
($712.50), would cost $713 (rounded up).

Solution:
Off-Season On-Season
Ticket Cost $1425.00 $825.00
Discount % x 50% x 30%
Value of Discount $712.50 $247.50

4
Ticket Cost $1425.00 $825.00
Less Discount - $712.50 - $247.50
Total Cost $712.50 $577.50

Better Deal

In this case, the marketing team probably expects people to jump at the half-off deal
and not research details for a time when people want to travel. As a result, some people
wind up paying more for their trip!

Other Everyday Percent Problems

Similar to the travel problem offered above, these situations occur with automobile
purchases. In Auto Sales the advertising touts the costs and savings along with the fuel
economy of the automobile. Many buyers make their purchase decisions to replace an
automobile based on the higher gas mileage alone assuming that this and the vehicle price
are the only factors needed to decide on a purchase. The reality is fuel economy is ONLY
ONE of the several considerations in making a good purchase. With pencil and paper, the
decision making process on a purchase for final consideration would include the monthly
payments required when purchasing through a finance company which is composed of their
interest rate and life of the loan; then there is the insurance cost of the purchase, and the
annual repairs, taxes, licensing fees, and the last item is the cost of fuel per mile that the
vehicle will be driven on average over one year. All of these added together and compared to
any ‘trade-in’ determine if the purchase is a ‘good deal’. Any good economist will tell you
that the least expensive automobile anyone can drive is one that is already owned and the
owner is no longer making purchase payments.

People who work on commission often receive from 1.5% to 20% percent of the value of
a sale they make for a company. Presuming that a car salesman receives 20% commission
on net gross for new car sales, selling an eighty-thousand dollar car with a net gross of
$20,000 would yield about (0.2 x $20,000 =) $4,000 in commission from the sale.
Real Estate commissions are from 5% to 10% of the property price depending on
whether the sale is for residential, commercial or agricultural land. Residential sales are

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