Question

sells its products at trade discounts of 30%, 10%. A competitor has been offering products at the same list prices but with trade discounts of 25%, 20%. Island Reman wishes to beat the competitor's prices by offering a third trade discount. At least how big must the additional discount rate be to meet this objective?

Answer 1

5%

Explanation:

Given that:

Island Reman offers discounts at list price = 30%, 10%

Competitor offers discounts at the same list price = 25%, 20%

To find:

The minimum third discount to beat the competitor's price = ?

Solution:

First of all, let us find the actual price for each of them.

Let the list price be 100.

Applying the successive discounts of Island Reman:

1st discount:
`100 * (30)/(100)=30`

Price after 1st discount = 70

2nd discount:
`70 * (10)/(100)=7`

Price after 2nd discount = 70 - 7 = 63

Applying the successive discounts of competitor:

1st discount:
`100 * (25)/(100)=25`

Price after 1st discount = 75

2nd discount:
`75 * (20)/(100)=15`

Price after 2nd discount = 75 - 15 = 60

Difference between price = 63 - 60 = 3

3 is ~4.76% of 63.

Therefore, to beat the competitor's price, Island Reman should give at least 5% additional third discount.