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A local Radio Shack Store wants to buy a new line of Plasma TV's. Manufacturer A offers chain discounts of 18/12, while Manufacturer B offers terms of 17/13. The single equivalent discount rate of ? is the best deal.

Verified Answer :

syed514

This question can be solved as follows:

A discount offered = (100-18)(100-12)/(100100)

B discount offered = (100-17)(100-13)/(100100)

fernandocsilqueiroz

Answer:

Manufacturer A: 0.2784 or 27.84%

Manufacturer B: 0.2779 or 27.79%

Therefore, there is not much of a relevant difference but still manufacturer A has a better offer.

Explanation:

calculating the equivalent final discount rate using the formula:

FD= [1- (1-D1(%)) x (1-D2(%))]

D1: first discount to retail price (%)

D2: second discount to the first net price (%)

FD: Final equivalent discount rate (%)

observation: the expression can always be expanded to add more chain discounts using the same principles.

Manufacturer A 18/12

Chain Discount:  D1= 18 D2= 12

FD= [1- (1- 0.18) x (1-0.12)] ≅ 0.2784

Manufacturer B 17/13

Chain Discount: D1= 17 D2= 13

FD= [1- (1- 0.17) x (1-0.13)] ≅ 0.2779

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