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Discount Formula helps determine the reduction in the price of any service or product. It is calculated on the marked price of the product.
- The discount formula can be found by subtracting the product's selling price from its marked price.
- It is also obtained by multiplying the discount rate provided by the product's market price.
- We all want to take advantage of discounts, but we need to figure out how to do it.
- The formula will help solve these problems easily.
- Business owner offers them to sell off their products quickly.
- The "Amazon: Great Indian Festival" and the "Flipkart: Big Billion Day" are some examples of discounts.
- The discount formula can mathematically be represented as follows:
Discount = Marked Price – Selling Price
Key Terms: Discount Formula, Discount, Selling Price, Cost Price, Discount Percent, Percentage, Fake Discounts, Discount Rate, Successive Discounts, Promotional Discounts, List Price
Discount Definition
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The term "discount" refers to the price of a bond that is less than its face value. It can also be defined as the difference between the price paid and the par value.
- A discount is a decrease or subtraction in a product's cost price.
- It's most commonly employed in consumer transactions when individuals are given discounts on a variety of things.
- Mostly it is offered by retailer to clear off their inventory.
- Discount is often referred to as “Off" and "Reduction".
- Cost Price refers to the price at which owner get a object from the manufacturer.
- The price at which an object is sold to the customer is called selling price.
- The discount rate is expressed as a percent.
Example Discount DefinitionExample: Find the discount received by Bobby on a chair, if the selling price of the chair is $10 and the list price is $20? Solution: Given, list price = $20 and selling price = $10.
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Discount Formula
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The term "discount" refers to a pricing scheme in which a commodity's (goods or services) price is lower than its market price. It is a percentage of the advertised price.
- A discount is a type of product price reduction that is seen in consumer interactions.
- It is offered when buyers propose a proportion of rebates on various items in order to stimulate sales.
- The method is a type of refund made by the seller to the customer.
In terms of mathematics, the discounting formula is as follows:
Discount = Marked Price – Selling Price
OR
Discount Percentage Formula = Marked Price × Discount Rate
Other basis Discount formula are as below:
Discount = List Price - Selling Price
Therefore,
Selling Price = List Price - Discount
List Price = Selling Price + Discount
Example of Discount FormulaExample: The price tag printed on a Top showed $20, but Dan paid $15 for it since there was a discount on it. Find the discount rate. Solution: Given, list price = $20 and selling price = $15.
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Discount Calculation
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The process to calculate discount are as follows:
Step 1
First, obtain the selling price and cost price of the object.
Step 2
The discount is offered when the selling price is less than the cost price.
Step 3
Obtain the discount by subtracting the selling price from the cost price.
Step 4
Calculate the discount percentage by dividing the discount by the cost price, which is later multiplied by 100.
Discount Rate
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When the price of an item is decreased and sold, a discount is given. The word "discount %" or "discount rate" refers to a percentage-based price decrease.
- The reduction is always applied to the advertised price after taking into account the selling price.
- The ‘listed price’ of a commodity is its regular price, excluding any discounts.
- When we buy anything, the ‘selling price’ is the amount we actually pay to get it.
The following formula is used to compute the discount rate:
- Discount (percentage) = (List Price - Selling Price)/ List Price x 100
- Discount % = (Discount/List Price) times; 100
- SellingPrice = ListPrice−Discount
- ListPrice = SellingPrice + Discount
- Rate of Discount = Discount% = Discount / ListPrice × 100
- ListPrice = SellingPrice (100/100−discount%)
Types of Discounts
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There are three types of discounts offered by retailer to customers which are as follows:
Promotional Discount
A promotional discount is a type of discount offered by business owners on a particular event. It is usually offered during Holi, Diwali, Id, and other festivals.
- Discounts offered on Holi or Republic Day are a type of promotional discount.
Trade Discount
Trade Discount refers to a type of discount that is offered by distributors to specific retailers. In this, distributors have ties-up with retailers and not with end customers.
Quantity Discount
Quantity discount is a type of discount that is offered by retailers on the quantity of items purchased by the customers. This is offered to customers when they purchase a large number of items.
- Offers like buy three get two free are a type of quantity discount.
Successive Discounts
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When two or more discounts are provided one after the other, the discounts are referred to as sequential discounts or discounts in series. Assume that an item is offered at a 15% discount.
- Then, on top of the decreased price of the goods, a 12 percent discount is applied.
- In this scenario, we state that 15 percent and 12 percent discounts are offered in that order.
Fake Discount
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Fake discounts, usually referred to as fictional pricing, are also available. It's a deceptive strategy used by some shops in which the assumed 'pre-sale price' of an item is artificially inflated, or the 'post-sale price' of an item is actually its market price.
- This is done primarily to deceive customers into believing they are receiving a discount.
- Thus increasing the likelihood of purchasing an item.
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Things To Remember
- Discount Formula is determined by subtraction in a product's cost price.
- It's most commonly employed in consumer transactions when individuals are given discounts on a variety of things.
- A discount is a refund made by the seller to the customer.
- The "discount rate" refers to a percentage-based price decrease.
- When two or more discounts are provided one after the other, the discounts are referred to as sequential discounts.
- It is generally given to the customers to increase the sales of the products.
Sample Questions
Ques: A sweater that costs Rs1500 is tagged "10 percent discount" in a clothing store. How can we find out what the discount rate is? What is the sweatshirt's retail price? (5 marks)
Ans: Given that the clothing store frequently sells items at a reduced price. A vendor will essentially reduce a product by a percentage of its original price. In this case, a product that was previously priced at Rs1500 has been reduced by 10%. As a result, "10% off" denotes the discount percentage. We need to follow a process to address this problem.
The rate is usually expressed as a percentage.
Simply multiply the rate by the original price to get the discount.
Subtract the discount from the original price to get the selling price.
We can easily tackle the preceding problem now that we have a method in place.
Given that the rate is 10%.
The discount is: 0.10 x Rs1500 = Rs150
Now, the sale price is reckoned as follows:
Original price = Rs1500
Discount - 150
Thus, the sale price = Rs1350
Ques: A washing machine was bought for Rs10000 by a merchant. He gave a 20% reduction on the original price and still made a 10% profit. Find out how much the washing machine costs? (5 marks)
Ans: Cost price of the washing machine = Rs10000, Profit% = 10%.
Thus, selling price = {100 + profit %} /100 × CP
= Rs [(100 + 10) / 100] x 100
= Rs [110 / 100] x 100
= Rs 11000.
Now, let the listed price be Rs x.
Then, the discount = 20% of Rs. x
= Rs [ x x (20 / 100)]
= Rs 1 x / 5
Therefore, SP = (Listed Price) - (discount)
= Rs (x - 1 x / 5)
= Rs 4 x / 5.
But, the SP = Rs 11000
Therefore, 4 x / 5 = 11000
⇒ x = (11000 × 5 / 4)
⇒ x = 13750
Hence, the marked price of the washing machine is Rs 13750
Ques: What are different types of discounts? (3 marks)
Ans: There are three sorts of discounts that are commonly used:
- Trade Discounts - This is a form of discount given to distributors by a supplier. This discount allows distributors to set their own pricing in order to sell all goods.
- Quantity Discounts - A quantity discount is one in which the customer receives a discount based on the number of units purchased. It's all because of economies of scale!
- Promotional Discounts - This is a form of discount that is very useful for promoting sales. This method of offering discounts has proven to be the most popular among retailers. You've probably seen one in the shape of a 50 percent Plus 20% off sale or a buy two, get one free deal.
Ques: On a product, discover a single discount that is equal to two successive 15% and 12% discounts? (5 marks)
Ans: Let's say a product's listed price is Rs 100.
Then there's a 15% discount on top of that.
After the first discount, the price is Rs (100 - 15) = Rs.85.
The second discount is based on the revised pricing, which is equal to 12% of Rs.85.
= Rs (12 / 100 ) X 85 = Rs 10.2
As a result, the price after the second discount is Rs (85 – 10.2) = Rs. 74.8.
74.8 as a net selling price
A single discount equal to successive discounts granted = (100 – 74.80)% = 25.2 percent.
Ques: State the advantages of providing discounts? (3 marks)
Ans: The following are some of the benefits of providing discounts:
- Getting New and Returning Clients: Discounts are a gimmick to get more customers into your business since people like to buy things that are on sale.
- Increase Sales Across the Board: Increased traffic generally translates to more sales — and not only on discounted products. Because the reductions attract more consumers, you will have more potential buyers for other items in your business, as most people will browse to see what you have to offer before buying.
- Clear Space in Your Business: Discounting items might help you clear space in your store. Lowering the price increases the possibility of their selling, which frees up room for new items.
Ques: State the disadvantages of providing discounts? (3 marks)
Ans: Following are some disadvantages for providing discounts:
- Harm to Brand Image: In the eyes of the general public, your company's quality has been tarnished: It's simple: we all assume that higher-quality goods and services will cost more. Like those big-name goods, your price should be aspirational. One of the disadvantages of discounts is that they harm your brand image.
- Cause a Pricing War: One of the most significant disadvantages of discounts is that it encourages individuals to browse around. When you decrease the price of your products or services, you're forced to compete with larger businesses that can afford to do so at a lower cost than a small company owner can.
- Profit margins will reduce: If you lower your prices, your profit margins will be slashed: In this situation, one of the primary disadvantages of discounts may be demonstrated. If your gross margin is 50% and you lower your pricing by 20%, you'll need to increase sales by 67 percent to keep your profit margin intact.
Ques: What is “Fake Discounts”? (2 marks)
Ans: Fake discount is a deceptive strategy used by some shops in which the assumed 'pre-sale price' of an item is artificially inflated, or the 'post-sale price' of an item is actually its market price.
Ques: Ram purchased a watch of Rs 400 and the discount offered on the watch was 20%. Find the price of the watch after discount offered? (3 Marks)
Ans: Given, principle amount p =400 Rs
Interest rate r = 20%
Discount rate, DR= p x r
DR = 400x 20% = 400 x 20/100=80
So, the discounted amount of the watch is 80
Now, Selling price(S.P) of the watch = Principal amount – discount rate
= 400- 80 = 320
So, the price of watch after discount offered is Rs 320
Ques: An umbrella marked at Rs 100 is sold for Rs 80. Find the discount rate? (3 Marks)
Ans: Given, M.P= 100 Rs
S.P= 80Rs
Discount rate = ?
By using the discount formula,
Discount = M.P – S.P
100 – 80 = Rs 20
Now, here we have to find Discount rate offered. So,
Discount Rate = [(Discount/ M.P) x 100]%
DR=[ (20/ 100) x 100] %
DR = 20%
So, the discount rate is 20%
Ques: The marked price of a table fan is Rs 730. During a season sale, it is sold out for Rs. 680. Find the discount offered on the table fan? (3 Marks)
Ans: Given, M.P = Rs 730
S.P = Rs 680
By using the discount formula,
Discount = M.P – S.P
= 730-680 = Rs 50
Now, here we have to find Discount rate offered. So,
Discount Rate = (Discount/ M.P) x 100
= 50/ 730 x 100
=6.8%
So, the offered discount% on the table fan is 6.8%
Ques: An umbrella marked at Rs 200 is sold for Rs 80. Find the discount rate? (3 Marks)
Ans: Given, M.P= 200 Rs
S.P= 80Rs
Discount rate = ?
By using the discount formula,
Discount = M.P – S.P
200 – 80 = Rs 120
Now, here we have to find Discount rate offered. So,
Discount Rate = [(Discount/ M.P) x 100]%
DR=[ (120/ 200) x 100] %
DR = 60%
So, the discount rate is 60%
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