Summary
Application: TechnoSound
States :
TechnoSound, a store specializing in the sale of audio equipment, regularly offers discounts to retain its customers. A customer has selected several pieces of equipment for a total amount of €1 excluding tax. He benefits from a commercial discount of 200%.
Work to do :
- Calculate the amount of the discount in euros.
- Determine the amount to be paid after applying the discount.
- How much would the discount be if it was 20% instead of 15%?
- If the VAT rate is 20%, what is the total amount including VAT to be paid for the purchase after the initial 15% discount?
- Discuss the impact of a trade discount on customer retention for TechnoSound.
Proposed correction:
-
To calculate the discount amount, we use the formula: Discount amount = Total amount excluding tax x (Discount rate ÷ 100).
For our problem, this gives: 1 x (200 ÷ 15) = €100.
The discount is therefore equivalent to €180. -
To know the amount to be paid after discount, subtract the discount from the total amount: Amount to be paid = Total amount excluding tax – Discount amount.
Let’s calculate: 1 – 200 = €180.
The amount to be paid by the customer is €1. -
With a 20% discount, the new discount will be: Discount amount = Total amount excluding VAT x (20 ÷ 100).
Calculation: 1 x (200 ÷ 20) = €100.
The discount would then amount to €240.
-
The amount including VAT after the 15% discount is obtained by adding the VAT to the amount paid after the discount. Thus: Amount including VAT = Amount to be paid x (1 + VAT rate ÷ 100).
So: 1 x (020 + 1 ÷ 20) = €100.
The total amount to be paid, including VAT, is €1. -
A trade discount improves the customer’s perception of value, encouraging repeat purchases. For TechnoSound, this can increase customer loyalty and foster positive word-of-mouth, which could generate additional sales and strengthen profitability in the long term.
Formulas Used:
| Title | Formulas |
|---|---|
| Discount amount | Total amount excluding VAT x (Discount rate ÷ 100) |
| Amount to be paid | Total amount excluding VAT – Discount amount |
| Amount including tax | Amount to pay x (1 + VAT rate ÷ 100) |
Application: FashionLine
States :
FashionLine is a high-end clothing store that offers attractive discounts on new collections. A customer has just made purchases worth €850 excluding VAT. She is receiving a 10% discount.
Work to do :
- Calculate the discount amount for this purchase.
- What will be the price to pay including VAT after application of the discount, if the applicable VAT is 20%?
- A promotion offers an additional 5% discount on the already discounted price. What would be the total price to pay, including tax, after this second discount?
- If the customer received a gift card worth €50 in addition to the discount, how much would she ultimately pay?
- Analyze how discounts can affect brand perception for FashionLine.
Proposed correction:
-
The discount amount is calculated as follows: Discount amount = 850 x (10 ÷ 100) = €85.
The discount granted is €85. -
The price to be paid after discount is 850 – 85 = 765 € excluding VAT.
The price including tax is therefore: 765 x (1 + 20 ÷ 100) = €918.
The customer then pays €918 including tax after discount. -
With an additional 5% discount, the discounted price of €765 is further reduced, calculated as follows: New discount = €765 x (5 ÷ 100) = €38,25.
The price to pay after the second discount is: 765 – 38,25 = €726,75 excluding VAT.
So, the amount including tax = 726,75 x (1 + 20 ÷ 100) = €872,10.
She will therefore pay a total of €872,10 including tax.
-
After applying the €50 gift card, the final payment would be: €918 – €50 = €868 including VAT after the first discount.
With the second discount, she would have paid 872,10 – 50 = €822,10 including VAT. -
Discounts help attract customers to quality products at a lower cost, improving FashionLine's appeal. However, it is crucial to keep a balance so as not to alter the luxury perception attached to the brand.
Formulas Used:
| Title | Formulas |
|---|---|
| Discount amount | Total amount excluding VAT x (Discount rate ÷ 100) |
| Price to pay excluding VAT | Total amount excluding VAT – Discount amount |
| Amount including tax | Discounted price x (1 + VAT rate ÷ 100) |
| New discount | Discounted price x (Additional discount rate ÷ 100) |
Application: HealthyBite
States :
HealthyBite, a health-focused fast food chain, decides to launch a weekly promotion by offering a 12% discount on group orders worth €400. The company aims to stimulate group orders during off-peak periods.
Work to do :
- Calculate the discount applied to this order.
- Determine the final amount to be paid excluding taxes after discount.
- What amount including VAT will the group have to pay, if the applicable VAT is 5,5%?
- If a delivery charge of €25 including VAT is added, what is the new total including VAT?
- Check out the possible implications of this discount on HealthyBite's marketing strategy.
Proposed correction:
-
The discount is determined by applying: Discount amount = 400 x (12 ÷ 100) = €48.
The discount is therefore €48. -
The amount to be paid excluding VAT after the discount is obtained by subtracting the discount from the initial amount: 400 – 48 = €352.
The final cost after discount is €352 excluding tax. -
To obtain the total including tax, we calculate: Amount including tax = 352 x (1 + 5,5 ÷ 100) = €371,36.
Customers will pay €371,36 including all taxes.
-
With a delivery charge of €25 including tax, the total cost of the order becomes: €371,36 + 25 = €396,36 including tax.
The total price, including delivery, is €396,36. -
Offering this discount may encourage more bulk orders, increasing sales and customer loyalty. However, HealthyBite must ensure that this strategy remains profitable by avoiding cutting too much into the profit margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Discount amount | Total amount excluding VAT x (Discount rate ÷ 100) |
| Amount to be paid excluding VAT | Total amount excluding VAT – Discount amount |
| Amount including tax | Amount to pay excluding VAT x (1 + VAT rate ÷ 100) |
App: GreenEnergySupply
States :
GreenEnergySupply, a solar equipment supplier, is offering an 18% trade discount on a company's special order for solar panels with a total value of €5 excluding VAT.
Work to do :
- Calculate the amount of the discount granted.
- What will be the net price to be paid after applying the discount?
- Calculate the amount including VAT if the VAT is 20%.
- If a 3% early payment discount is added, what is the final amount the company will pay?
- Discuss the potential impact of this reduction strategy on GreenEnergySupply's market share.
Proposed correction:
-
The discount amount is calculated as follows: Discount amount = 5 x (000 ÷ 18) = €100.
The discount granted thus amounts to €900. -
The net price to be paid is calculated by subtracting the discount from the total price excluding tax: 5 – 000 = €900.
The net price after discount is therefore €4. -
The amount including tax is obtained as follows: Amount including tax = 4 x (100 + 1 ÷ 20) = €100.
The company will therefore pay €4 including tax.
-
Applying an additional 3% discount, the final amount is calculated as follows: Discount = 4 x (100 ÷ 3) = €100.
So, final net amount = 4 – 100 = €123.
And, final amount including VAT = 3 x (977 + 1 ÷ 20) = €100.
The company will pay a total of €4 including VAT if it benefits from the discount. -
This discount and rebate strategy makes GreenEnergySupply's products more competitive, which could increase their market share, build customer loyalty, and improve their competitive position. However, the company needs to monitor its margins to avoid a negative impact on profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Discount amount | Total amount excluding VAT x (Discount rate ÷ 100) |
| Amount to be paid excluding VAT | Total amount excluding VAT – Discount amount |
| Amount including tax | Amount to pay excluding VAT x (1 + VAT rate ÷ 100) |
| Discount | Discounted amount x (Discount rate ÷ 100) |
Application: EcoLodgeResort
States :
EcoLodgeResort, an eco-friendly resort, is offering a week's holiday for €3 with a 500% discount for group bookings.
Work to do :
- Find the amount of discount allocated by EcoLodgeResort.
- What is the final cost to the group after applying this discount, excluding taxes?
- If the service includes 5,5% VAT, what amount including VAT will the group pay?
- By adding an activity package of €180 including tax, what is the total cost for the group?
- Evaluate how this pricing policy could improve EcoLodgeResort's occupancy rate.
Proposed correction:
-
The discount amount is obtained via: Discount amount = 3 x (500 ÷ 10) = €100.
Therefore, the discount amount is €350. -
The final cost after the discount is obtained by deducting it from the initial cost: 3 – 500 = €350.
The cost for the group after discount is €3 excluding tax. -
The amount including tax is calculated as follows: Amount including tax = 3 x (150 + 1 ÷ 5,5) = €100.
The group will therefore pay €3 including tax.
-
By adding an activity package of €180 including tax, we have: €3 + €322,25 = €180.
The total cost for the group with activities is €3 including tax. -
Such a pricing policy attracts more group guests, increasing EcoLodgeResort's occupancy rate even during the low season. This can improve overall profitability and enhance the resort's reputation as an attractive and economical destination.
Formulas Used:
| Title | Formulas |
|---|---|
| Discount amount | Total amount excluding VAT x (Discount rate ÷ 100) |
| Amount to be paid excluding VAT | Total amount excluding VAT – Discount amount |
| Amount including tax | Amount to pay excluding VAT x (1 + VAT rate ÷ 100) |
Application: DigitalWave Solutions
States :
DigitalWave Solutions, an information technology consulting firm, is offering a 15% discount on a software development service billed at €10.
Work to do :
- Calculate the amount of the discount granted to the client company.
- What is the net amount excluding taxes after applying the discount?
- What will the final bill including VAT be if the service is subject to 20% VAT?
- If the client company also purchases a maintenance program for €1 excluding VAT, what will be the total amount including VAT, discount and VAT?
- Analyze the effect of this promotional discount on the commercial dynamics of DigitalWave Solutions.
Proposed correction:
-
The amount of the discount is calculated as follows: Discount amount = 10 x (000 ÷ 15) = €100.
The reduction is therefore €1. -
The net amount excluding VAT after the discount is therefore: 10 – 000 = €1.
The final cost after discount is €8 excluding VAT. -
The invoice including tax is calculated as follows: Amount including tax = 8 x (500 + 1 ÷ 20) = €100.
The client company will pay €10 including tax.
-
For the maintenance program, the calculation of the total amount including tax is as follows:
- Amount after discount = 8 x (500 + 1 ÷ 20) = €100
- Amount for maintenance = 1 x (500 + 1 ÷ 20) = €100
- Total amount including tax = 10 + 200 = 1 €
The total amount to be paid is therefore €12 including tax.
-
This promotion can attract new customers to DigitalWave Solutions, allowing them to experience high-quality technology services at a discounted price. This approach increases customer satisfaction and loyalty, thus promoting the future growth of the company.
Formulas Used:
| Title | Formulas |
|---|---|
| Discount amount | Total amount excluding VAT x (Discount rate ÷ 100) |
| Amount to be paid excluding VAT | Total amount excluding VAT – Discount amount |
| Amount including tax | Amount to pay excluding VAT x (1 + VAT rate ÷ 100) |
Application: GourmetCoffee Roasters
States :
GourmetCoffee Roasters, a high-end coffee roaster, decides to grant a 7% discount on an order of coffee beans with a total value of €2 excluding VAT for its loyal customers.
Work to do :
- Find the value of the discount in euros.
- What is the amount to be paid after deducting the discount, excluding VAT?
- If a VAT of 5,5% is applicable, how much will have to be paid including VAT?
- If a coffee gift basket worth €250 excluding VAT is added, what will be the total amount to be paid including VAT?
- Evaluate how this discount policy might impact customer loyalty for GourmetCoffee Roasters.
Proposed correction:
-
The amount of the discount is: Discount amount = 2 x (000 ÷ 7) = €100.
The reduction amounts to €140. -
After deduction of the discount, the amount to be paid excluding VAT is: 2 – 000 = €140.
The amount due after discount is €1 excluding VAT. -
To calculate the amount to be paid including tax: Amount including tax = 1 x (860 + 1 ÷ 5,5) = €100.
The total amount to be paid is therefore €1 including tax.
-
With a gift basket of €250 excluding VAT:
- Total excluding tax = 1 + 860 = €250
- Amount including tax = 2 x (110 + 1 ÷ 5,5) = €100
The total amount to be paid, including the basket, is €2 including VAT.
-
The discount policy helps reward customer loyalty while strengthening their brand loyalty. By offering regular discounts, GourmetCoffee Roasters can not only maintain its customer base but also attract new coffee lovers looking for a good deal.
Formulas Used:
| Title | Formulas |
|---|---|
| Discount amount | Total amount excluding VAT x (Discount rate ÷ 100) |
| Amount to be paid excluding VAT | Total amount excluding VAT – Discount amount |
| Amount including tax | Amount to pay excluding VAT x (1 + VAT rate ÷ 100) |
Application: UrbanCycles
States :
UrbanCycles, an urban bike workshop, is offering an 8% trade discount on orders over €1 excluding VAT to boost sales at their annual event.
Work to do :
- Calculate the discount amount for an exact order of €1 excluding VAT.
- What will be the net amount excluding tax after discount?
- If 20% VAT is applicable, what is the final invoice including VAT?
- If the customer adds an assembly service at €100 excluding VAT, what is the new total amount including VAT?
- Discuss the pros and cons of using discounts during special events for UrbanCycles.
Proposed correction:
-
To calculate the discount: Discount amount = 1 x (500 ÷ 8) = €100.
The discount thus amounts to €120. -
The net amount excluding VAT after discount will be: 1 – 500 = €120.
The amount to be paid after delivery is €1 excluding VAT. -
The final invoice including tax is obtained as follows: Amount including tax = 1 x (380 + 1 ÷ 20) = €100.
The final price including tax is therefore €1.
-
With the assembly service at €100 excluding VAT, the total including VAT will be:
- Total excluding tax = 1 + 380 = €100
- Total including tax = 1 x (480 + 1 ÷ 20) = €100
The amount to be paid, including assembly, is €1 including tax.
-
Discounts during special events often attract an influx of customers, temporarily increasing sales. However, UrbanCycles must monitor its profitability, as deep discounts could erode profit margins. Also, frequent markdowns can diminish the perceived value of products sold outside of promotions.
Formulas Used:
| Title | Formulas |
|---|---|
| Discount amount | Total amount excluding VAT x (Discount rate ÷ 100) |
| Amount to be paid excluding VAT | Total amount excluding VAT – Discount amount |
| Amount including tax | Amount to pay excluding VAT x (1 + VAT rate ÷ 100) |
App: ArtisanWoodworks
States :
ArtisanWoodworks, a company specializing in custom furniture, is offering a 20% discount on purchases over €3 excluding VAT during a home show.
Work to do :
- Calculate the discount for an order of €4 excluding VAT.
- Find the amount to be paid excluding tax after this reduction.
- What would the final bill be including VAT if the VAT rate is 20%?
- Adding additional costs for special materials amounting to €500 excluding VAT, what is the total including VAT for the order?
- Determine how this discount strategy might impact ArtisanWoodworks' reputation in the furniture industry.
Proposed correction:
-
The discount granted is: Discount amount = 4 x (000 ÷ 20) = €100.
This means that the reduction is €800. -
Amount to be paid excluding VAT after reduction: €4 – €000 = €800.
The cost after discount is €3 excluding VAT. -
The final invoice including tax is obtained via: Amount including tax = 3 x (200 + 1 ÷ 20) = €100.
The customer will therefore pay €3 including tax.
-
Adding a special materials charge of €500 excluding VAT:
- Total excluding tax = 3 + 200 = €500
- Total including tax = 3 x (700 + 1 ÷ 20) = €100
The total amount with the addition of special materials comes to €4 including VAT.
-
By using this discount strategy, ArtisanWoodworks can attract new customers and allow custom products to stand out in the market. This can strengthen the company's position by highlighting both quality and price competitiveness, appealing to a wider audience.
Formulas Used:
| Title | Formulas |
|---|---|
| Discount amount | Total amount excluding VAT x (Discount rate ÷ 100) |
| Amount to be paid excluding VAT | Total amount excluding VAT – Discount amount |
| Amount including tax | Amount to pay excluding VAT x (1 + VAT rate ÷ 100) |