How to Calculate a Trade Discount
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A trade discount is similar to a sales discount in that the purchaser can buy a product for less than the list price of the product. Companies usually give trade discounts to other companies that buy often or buy large amounts of products. Normally, a trade discount is presented as a percentage off of the list price.
For example, a trade discount would be 10 per cent off the list price.
Determine the list price of the object. For example, Company A is selling widgets for £325,000.
Determine the trade discount percentage. For example, Company B wants to buy the £325,000 widgets and has always been a good customer to Company A so Company A offers a trade discount of 10 per cent to Company B.
- A trade discount is similar to a sales discount in that the purchaser can buy a product for less than the list price of the product.
- Normally, a trade discount is presented as a percentage off of the list price.
Multiply the price by the trade discount percentage to determine the amount of the trade discount. In our example, 10 per cent of £325,000 equals a trade discount of £32,500.
Subtract the trade discount from the selling price to determine the selling price net any trade discounts. In our example, £325,000 minus £32,500 equals a net selling price of £292,500.
Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.