How Discount Is Calculated

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How To Calculate a Discount Using 2 Methods

Businesses occasionally give discounts to customers in an effort to draw in a different type of clientele or boost interest in a certain commodity or service. Businesses must make sure they can either break even or turn a profit at a lower price, regardless of the motivation for the reduction. Some businesses may find that a modest initial income loss is worthwhile given the expanded consumer base.

In this post, we’ll examine the two main approaches to figuring out a discount and give you a step-by-step tutorial for each with examples to help you grasp the ideas.

How to calculate a discount as a percentage of the original price

It is simple to figure out a discount as a proportion of the original cost. Because the outcome is precise to the cent, you can calculate your revenue potential and create reliable sales projections. Take these actions:

1. Convert the percentage to a decimal

The discount percentage must first be expressed as a decimal. Calculators have a function for this, but you can also do it by hand. Moving the decimal point two positions to the left completes the conversion. Consider a 5% discount, for example. There is an assumed decimal point after the number 5. To get the percentage in decimal form, move the point two positions to the left. This gives you 0.05.

2. Multiply the original price by the decimal

The next step is to do a fundamental mathematical operation to ascertain the cash value of the discount. To achieve this, multiply the item’s original price by the decimal established in step one.

3. Subtract the discount from the original price

The last stage is subtracting. Subtract the discounted dollar amount from the initial cost using the formula you created in step two. The final discounted cost of the item is the resultant difference.

How to calculate a discount through estimation

Calculating a discount to the exact penny is not always practicable or efficient. Maybe you just want a general idea of whether you can reduce pricing while still making money. It’s helpful to be able to estimate a discount in such circumstances. To find out how just do as follows:

1. Round the original price

A number is rounded when it is raised or lowered to a specific numeric place. Round it to the nearest ten in this instance. Always remember that when rounding, the general rule is to round up if a number is at or above the halfway mark and down if it is below. As a result, a number of 35 would round up to 40 while a number of 34 would round down to 30.

2. Find 10% of the rounded number

By calculating 10% of the rounded value, you can further simplify the problem and arrive at a figure that is simple to calculate mentally. Put the decimal point one place to the left to accomplish this.

3. Determine “10s”

Figure out how many 10s are in the discount. Don’t worry about any 5s at this point.

4. Estimate the discount

To calculate the discount, multiply the 10s found in step three by the 10% dollar amount from step two. Add these numbers together.

5. Account for 5%

There might be a 5 in the hundreds spot with some reductions. If so, divide the dollar amount for 10% by two to determine the amount in dollars for the remaining 5%.

6. Add the 5%

Next, add the 5% dollar amount to the initially anticipated discount to get the final discount value. In other words, add the numbers you determined in stages four and five.

7. Calculate the sale price

Finally, deduct the original rounded price from the final discount you calculated in step six. This is the approximate discounted cost for you.


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