1. The distributor of Nikita power tools is offering a trade discount of 38% to hardware stores.
What will
the stores’ cost be to purchase a rotary saw listed at $135?
2. A 37.5% trade discount on a camera represents a discount of $223.14 from the suggested retail price.
What is the net price to the buyer?
3. Niagara Dairies gives convenience stores a discount of 24% on butter listed at $72.00 per case. What
rate of discount will Silverwood Milk Products have to give on its list price of $74.50 per case to match
Niagara’s price to convenience stores?
4. Cynthia and Byron sell mutual funds for Syndicated Investors. Purchasers of mutual funds from agents
of Syndicated Investors pay a front-end commission of 5.5%. The commission is paid on the total
amount paid to Syndicated Investors, not on just the net amount actually invested in mutual funds. a.
Mr. and Mrs. Stevens placed $5500 through Cynthia. What amount was actually invested in mutual
funds after the commission was paid? b. If the net amount invested in mutual funds as a result of
Byron’s sale to Mrs. Stocker was $6426, what amount of commission was paid on the sale?
5. A retailer is offered a regular discount of 25%, a further discount of 7.5% if she places an order
exceeding $10,000 (at list prices), and another 5% discount for participating in a joint promotion with
the distributor. a. If the retailer is eligible for all three trade discounts, what will be the net price of an
order totalling $11,500? b. What is the dollar amount of the saving from the quantity discount
(assuming that she does not participate in the joint promotion)? c. What is the dollar amount of the
discount received for participating in the joint promotion?
6. In addition to the basic trade discount of 20%, an outboard engine manufacturer gives a boat dealer
an additional discount of 12.5% for providing follow-up warranty service, and a 5% discount for co-
operative advertising and boat-show promotions. a. After the basic discount, what further price
reduction (in dollars) does the 12.5% discount represent on an engine with a list price of $3000? b.
After the first two discounts, what price reduction does the 5% discount give on the $3000 engine?
7. Omega Restaurant buys Merlot wine at $10.95 per bottle, and sells it to customers at $24.95 per
bottle. Calculate Omega’s rate of markup and gross profit margin on the wine.
8. Computer Warehouse buys a printer for $380 less trade discounts of 20% and 10%. If the operating
expenses are $57 per printer: a. What should be the selling price to generate a profit of $33 per
printer? b. What is the rate of markup? c. What is the gross profit margin? d. What would be the
break-even selling price for an inventory clearance sale?
9. Workers World bought 250 pairs of rubber boots at $15 per pair. The manager applies a 90% rate of
markup when pricing footwear. What is the unit operating profit if overhead expenses work out on
average to be 20% of the selling price?
10. Beaver Building Supply obtains 4-ft by 8-ft sheets of half-inch plywood from Macmillan Forest
Products at $36 per sheet less discounts of 30% and 5%. The trade price is to be set to cover Beaver’s
overhead of 20% of the selling price and to provide an operating profit of 12% of the selling price.
What should be the retail price per sheet?
11. Water Sports Ltd. pays $360 less 25% for a backyard above-ground pool kit. Overhead expenses are of
the regular selling price, and the operating profit is 15% of the selling price. a. What is the maximum
rate of markdown the store can offer and still break even? b. What is the profit or loss per unit if
Water Sports clears out its remaining stock at 20% off in a Hot August Bargains sale?
12. Hi-Lites Inc. purchased a ceiling fixture for $480 less 40% and 25%, and marked it up by 120% of cost.
In a clearance sale, Hi-Lites offered the fixture at 40% off. a. What was the sale price? b. At the sale
price, what was the rate of markup? c. If overhead expenses were 55% of cost, what was the
operating profit or loss at the sale price?
13. Comfort Shoes’ normal gross profit margin is 45%. What rate of markdown can the store
offer on a pair of shoes normally priced at $140, and still realize a 20% rate of markup at the
sale price?
14. A retailer pays $81 to a wholesaler for an article. The retail price is set using a gross profit
margin of 40%. To increase traffic to his store, the retailer marks the article down 20%
during a sale. What is the sale price?
