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Calculate net price factor and net price.

– Dollars list price – $435.20\$$

– Trade discount rate – $26\%$, $15\%$,and $5\%$

The aim of this article is to find the net price factors from the given trade discount rate and use them to find the net price.

The basic concept behind this article is the understanding of Item List Price, Trade Discount, and the Complement Method to find the Net Price.

The price at which an item is generally being sold is called its List Price or Catalogue Price. In order to purchase the item at a discounted rate, a trade discount is offered on the List Price. The Trade Discount is defined as the amount of discount being offered on the item by expressing it as a percentage of the List Price. After incorporating the discount, the final price that is to be paid for the item is called Net Price.

The Net Price is also calculated by using the Complement Method for Trade Discount. It the defined as $100\%$ minus the discount rate to calculate the Net Price Rate and then multiply it with the List Price to find the Final Net Price of the item:

\[Net\ Price\ Rate=100\%-Trade\ Discount\ \%\]

\[Net\ Price=List\ Price\times Net\ Price\ Rate\]

If multiple trade offers are given, then their total net price factor is calculated by multiplying the percentage of the net price factor for each trade offer. And the total net price is then calculated by using the Complement Method as explained before.

Expert Answer

Dollars List price – $435.20\$$

First Trade Discount Rate $TDR1=26\%$

Second Trade Discount Rate $TDR2=15\%$

Third Trade Discount Rate $TDR3=5\%$

Initially, we will calculate the Net Price Factor for each Trade Discount Rate as follows:

\[Net\ Price\ Rate=100\%-Trade\ Discount\ %\]

First Net Price Rate $NPR1$ is:

\[NPR1=100\%-TDR1\]

\[NPR1=100\%-26\%\]

\[NPR1=74\%\]

\[NPR1=0.74\]

Second Net Price Rate $NPR2$ is:

\[NPR2=100\%-TDR2\]

\[NPR2=100\%-15\%\]

\[NPR2=85\%\]

\[NPR2=0.85\]

Third Net Price Rate $NPR3$ is:

\[NPR3=100\%-TDR3\]

\[NPR3=100\%-5\%\]

\[NPR3=95\%\]

\[NPR3=0.95\]

The total net price factor is calculated by multiplying the percent of the net price factor for each trade offer:

\[NPR=NPR1\times NPR2\times NPR3\]

\[Net\ Price\ Factor\ NPR=0.74\times0.85\times0.95\]

\[Net\ Price\ Factor\ NPR=0.59755\]

The net price is also calculated by using the Complement Method for Trade Discount as follows:

\[Net\ Price=List\ Price\times Net\ Price\ Factor\]

Substituting the values in the given equation, we get as follows:

\[Net\ Price=435.2$\times0.59755\]

\[Net\ Price=260.05376$\]

Numerical Result

The Net Price Factor $NPR$ is:

\[Net\ Price\ Factor\ NPR=0.59755\]

The Net Price is:

\[Net\ Price=260.05376$\]

Example

Compute the Net Price using the given List Price and Trade Discount Rates:

Dollars list price – $325\$$

Trade discount rate – $20\%$, and $12\%$

Solution

First Trade Discount Rate $TDR1=20\%$

Second Trade Discount Rate $TDR2=12\%$

First Net Price Rate $NPR1$ is:

\[NPR1=100\%-TDR1\]

\[NPR1=100\%-20\%\]

\[NPR1=80\%\]

\[NPR1=0.80\]

Second Net Price Rate $NPR2$ is:

\[NPR2=100\%-TDR2\]

\[NPR2=100\%-12\%\]

\[NPR2=88\%\]

\[NPR2=0.88\]

The total net price factor is calculated by multiplying the percent of the net price factor for each trade offer:

\[Net\ Price\ Factor\ NPR=0.8\times0.88\]

\[Net\ Price\ Factor\ NPR=0.704 \]

The Net Price is as follows:

\[Net\ Price=List\ Price\times Net\ Price\ Factor \]

\[Net\ Price=325$\times0.704 \]

\[Net\ Price=228.8$ \]

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