7.6 Terminology and Glossary of Symbols

Terminology

• Break-even selling price: This is the price at which a product’s selling price precisely covers both its cost (C) and overhead expenses (E), resulting in no profit.
• (Trade) Discount Series: When the list price is subject to more than one trade discount, it is referred to as a discount series.
• List Price (L): Also known as the sticker price or manufacturer’s suggested retail price (MSRP), it is the price at which the manufacturer recommends selling a product to the consumer.
• Markdown (MD): The amount by which the regular selling price (S) of a product is reduced to determine the sale price or reduced selling price ([asciimath]S_(Red)[/asciimath]), usually from the retailer to the consumer.
• Markup (M): The additional amount a business adds to the cost of purchasing a product (C) to determine the selling price (S).
• Net Price (N): The reduced price the buyer pays for a product after receiving the trade discount.
• Net Price Factor (NPF): The percentage of the list price that a business pays for a product after applying a trade discount.
• Overhead expenses (E): Also known as expenses, these are ongoing costs associated with operating a business.
• Single equivalent trade discount rate ([asciimath]d_(eq)[/asciimath]): The single rate of discount that represents a series of trade discounts, yielding the same net price as a series of trade discount rates.
• Single trade Discount (d): This represents a reduction of the list price offered between traders in the supply chain.
• Supply (merchandising ) chain: The network or stages through which a product passes as it transforms from a raw material into a finished product delivered to the consumer.

Glossary of Symbols

Trade discounts

• L: List Price ($)
• A: Amount of trade discount ($)
• d: Trade discount rate (%)
• N: Net Price ($)
• NPF: Net Price Factor (%)
• [asciimath]d_(eq)[/asciimath]: Equivalent rate of discount (%)

Markup

• S: Selling Price ($)
• M: Markup ($)
• P: Profit (operating profit) ($)
• Rate of [asciimath]MoC[/asciimath]: Rate of markup on cost (%)
• Rate of [asciimath]MoS[/asciimath]: Rate of markup on selling price (%)

Markdown

• MD: Amount of markdown ($)
• Rate of MD: Rate of markdown (%)
• [asciimath]S_(Red)[/asciimath]: Reduced selling price during the sale period ($)
• [asciimath]P_(Red)[/asciimath]: Profit during the sale period ($)