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Discount Formula (Table of Contents)

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What is the Discount Formula?

The term “discount” refers to the pricing system wherein the price of a commodity is lower than its listed price. In other words, a discount is a type of price deduction of a product that is mostly seen in consumer transactions, where the consumers are offered discounts on various products to boost sales. The formula for discount can either be derived by deducting the selling price of the product from its listed price or by multiplying the offered discount rate and the listed price of the product. Mathematically, the discount is represented as below,

Discount = Listed Price – Selling Price

Discount = Listed Price * Discount Rate

Examples of Discount Formula (With Excel Template)

Let’s take an example to understand the calculation of the Discount Formula in a better manner.

You can download this Discount Formula Excel Template here – Discount Formula Excel Template

Discount Formula – Example #1

Solution:

Discount is calculated using the formula given below

Discount = Listed Price * Discount Rate

Discount = $15 * 10%

Discount = $1.50

Selling Price is calculated using the formula given below

Selling Price = Listed Price – Discount

Selling Price = $15 – $1.50

Selling Price = $13.50

Therefore, the offered discount and selling price of each DVD are $1.50 and $13.50 respectively.

Discount Formula – Example #2

Let us take the example of a department store that is offering flash sale discounts to clear all its stock. Apparently, the store is selling dresses worth $150 each at a discounted price of $120. Calculate the offered discount and the discount rate for each dress.

Solution:

Discount is calculated using the formula given below

Discount = Listed Price – Selling Price

Discount = $150 – $120

Discount = $30

Discount Rate is calculated using the formula given below

Discount Rate = Discount / Listed Price * 100%

Discount Rate = $30 / $150 * 100%

Discount Rate = 20%

Therefore, the discount and discount rate offered on each dress are $30 and 20% respectively.

Discount Formula – Example #3

Solution:

Listed Price is calculated using the formula given below

Listed Price = Price of Each Shirt * Number of Shirts

Listed Price = $75 * 4

Listed Price = $300

Selling Price is calculated using the formula given below

Selling Price = Price of each Shirt * Number of Shirts

Selling Price = $75 * 3 [since the fourth shirt is free]

Selling Price = $225

Discount is calculated using the formula given below

Discount = Listed Price – Selling Price

Discount = $300 – $225

Discount = $75

Discount Rate is calculated using the formula given below

Discount Rate = Discount / Listed Price * 100%

Discount Rate = $75 / $300 * 100%

Discount Rate = 25%

Therefore, the bundle discount and discount rate offered on the shirts are $75 and 25% respectively.

Explanation

The first formula for discount can be computed by using the following steps:

Step 1: Firstly, figure out the listed price of the product which is the price printed on it.

Step 2: Now, determine the selling price of the product which is the actual price at which the product is being sold.

Step 3: Finally, the formula for discount can be derived by deducting the selling price (step 2) of the product from its listed price (step 1) as shown below.

Discount = Listed Price – Selling Price

The second formula for discount can be computed by using the following steps:

Step 1: Firstly, figure out the listed price of the product.

Step 2: Now, determine the discount rate offered on the product as part of the sales promotion initiatives.

Step 3: Finally, the formula for discount can be derived by multiplying the offered discount rate (step 2) and the listed price (step 1) of the product as shown below.

Discount = Listed Price * Discount Rate

Relevance and Use of Discount Formula

From the point of view of a business, it is very important to understand the concept of discount because it not only impacts the top line of a company but also the profitability and eventually the bottom line too. As such, it is essential that a company plans its sales promotions accordingly to achieve the desired results. In the case of lower than expected sales volume, the sales discount can negatively impact the net income of the company. It is important to note that the original price (not selling price) should be the denominator for calculating the discount percentage. Usually, the discounts are used to drive sales either after opening a new store or during year-end to clear the existing stock.

Discount Formula Calculator

You can use the following Discount Formula Calculator

Listed Price Selling Price Discount Discount = Listed Price

–

Selling Price =

–

= 0