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Selling
• One important consideration in pricing the merchandise is to obtain the
possible largest profit. This can be done through successful pricing of
merchandise for sale.
• When determining prices of merchandise, the business owners have to
consider several factors such as the target customers, competitors,
suppliers, store policies and the nature of quality of the merchandise.
• We shall refer to the selling price as the decided selling price since the
(+) or (–) final adjustment is a matter decided only by the retailer.
• In symbols,
• Selling Price = Cost + Mark up
• Where mark-up = operating expense + net profit ± final adjustment
Thus,
Selling Price (SP) = Cost (C) + Mark up (MU)
Definition of terms
• COST PRICE:
• The price that a company or store has to pay for the goods it
is going to sell
• The price that has to be spent to produce goods or services
before any profit is added
• This is usually computed on a per unit basis.
• OPERATING COST:
• the price (per unit) incurred relative to the production and sale of a
commodity
Definition of terms
• PROFIT:
• money earned after the cost price and the operating costs are accounted for
after the sale of a commodity
• SELLING PRICE:
• the price at which the commodity is sold per unit
• To compute for the SELLING PRICE:
• S=C+E+P
• where S = Selling Price
• C = Cost Price
• E = Operating Expenses
• P = Profit
Mark UP
60%
Trade
Discount Using Complement:
$2,700 x .60 = $1,620
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Examples:
• If a business man buys a box of canned goods listed at P 680.00 with a
trade discount of 25%, how much will be the net price?
• XYZ Suppliers gives a trade discount of 18% on a certain appliance item
for a minimum purchase of 1 dozen at a list price of P 2,500.00 per piece.
If a retailer buys a dozen of the appliance, how much will he pay per
piece? For a dozen?
• The list price of a box of bar or soap is P1,250.00. If the retailer buys the
box at P 937.50, calculate the a) trade discount, and b)trade discount
rate.
Quiz:
• A retail dealer purchases a washing machine listed in the
manufacturer’s catalog at P 18,500.00 less 30% discount.
What is the invoice price of the washing machine?
• How much would RTM Hardware Store have to pay for 15
dozen set of tools of the quoted price is P 6,240.00 dozen less
25% trade discount?
• An electric range listed in AMP Company’s catalog at
P23,000.00 is billed to the retailer at P 20,100. Determine the:
• Amount of Trade Discount
• Trade Discount Rate
Successive Trade Discount
• On account of decline of market prices or to encourage further purchase
for more merchandise in large quantities or to receive frequent orders,
manufacturers and wholesalers offer successive trade discounts to
retailers. Giving successive trade discounts is a method of granting two
or more trade discounts to the retailers this method is also known as
DISCOUNT SERIES, CHAIN or MULTIPLE DISCOUNTS.
• Chain discounts are trade discounts in a series of two or more
successive discounts.
Formula
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Examples
Credit Period
Mar. 1 Mar. 31
Discount Period
Mar. 1 Mar. 10
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Receipt of Goods (ROG)
3/10, n/30 ROG - Cash discount period begins when the
buyer receives the goods.
Example: $900 invoice dated May 9, received goods July 8;
terms 3/10, n/30 ROG; paid on July 20.
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End of Month (EOM)
1/10 EOM -- 1% discount, up until the 10th of the following month.
Example: $600 invoice dated July 6; no freight or returns; terms 1/10
EOM; paid on August 8.
$600 x .01 = $6
$600 -- $6 = $594
or
$600 x .99 = $594
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End of Month (EOM)
2/10 EOM – Considered the “25th rule;” skip a month
Example: $800 invoice dated April 29; no freight or
returns; terms 2/10 EOM; paid on June 18.
No discount; $800 paid.
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Quiz: