Chapter 7, Problem 1ECP

To determine

The net price equivalent rate, single equivalent discount rate, trade discount and net price for the given data.

Answer to Problem 1ECP

The net price equivalent rate is 0.9603, single equivalent discount rate is 0.0397, trade discount amount is $31.72 and the net price is $767.28.

Explanation of Solution

Given:

The list price is $799.

The chain discount is $3/1$.

Formula used:

$\text{Trade discount amount}=\text{List price}\times \text{Single equivalent discount rate}$

$\text{Net price}=\text{List price}\times \text{ Net price equivalent rate}$

Calculation:

The chain discounts are 3% and 1%.

Hence, the complement of 3% chain discount is $100\%-3\%=97\%$ and the complement of 1% chain discount is $100\%-1\%=99\%$.

Calculate the net equivalent rate as follows.

$\begin{array}{c}97\%\times 99\%=0.97\times 0.99\\ =0.9603\end{array}$

Compute the net price using the above formula as follows.

$\begin{array}{c}\text{Net price}=\text{799}\times \text{0}\text{.9603}\\ =\text{\$767}\text{.2797}\\ \approx \text{\$767}\text{.28}\end{array}$

Calculate the single equivalent rate as shown below.

$\begin{array}{c}\text{Single equivalent rate}=1-0.9603\\ =0.0397\end{array}$

Compute the trade discount amount using the above formula as follows.

$\begin{array}{c}\text{Trade discount amount}=\text{799}\times \text{0}\text{.0397}\\ =\text{\$31}\text{.7203}\\ \approx \text{\$31}\text{.72}\end{array}$

Therefore, the net price equivalent rate is 0.9603, single equivalent discount rate is 0.0397, trade discount amount is $31.72 and the net price is $767.28.