Money matters in everyday life, from shopping to selling. We'll explore how sales tax, commissions, and discounts affect prices. These concepts are crucial for understanding financial transactions and making informed decisions.

Calculating final costs involves more than just the sticker price. We'll learn how to factor in taxes, determine salesperson earnings, and figure out discounted prices. These skills help us budget better and grasp business pricing strategies.

Sales Tax, Commission, and Discounts

Sales tax calculations

• Sales tax percentage added to selling price to determine total cost
  • Formula: $\text{Total Cost} = \text{Selling Price} + (\text{Selling Price} \times \text{Sales Tax Rate})$
  • Example: Item costs $100, 8% sales tax rate, total cost is $100 + ($100 \times 0.08) = $108
• Sales tax rates differ by location and item type
  • Some states have no sales tax, others range from 1% to over 10% (California, New York)
  • Certain items may be exempt or have reduced rates (groceries, prescription medications)

Commission amount determination

• Commission percentage of selling price paid to salesperson
  • Formula: $\text{Commission} = \text{Selling Price} \times \text{Commission Rate}$
  • Example: Salesperson sells item for $500, 10% commission rate, earns $500 \times 0.10 = $50 commission
• Commission rates vary based on several factors
  • Type of product sold (electronics, real estate)
  • Salesperson's experience or performance (entry-level, top performer)
  • Company policies (flat rate, tiered structure)

Discount application and final costs

• Discounts reduce selling price, usually a percentage
  • Formula: $\text{Discounted Price} = \text{Original Price} - (\text{Original Price} \times \text{Discount Rate})$
  • Example: Item originally $80, 25% off sale, discounted price is $80 - ($80 \times 0.25) = $60
• Multiple discounts can apply to the same item
  1. Calculate each discount separately based on previous discounted price
  2. Example: Item costs $100, 20% discount and additional 10% discount
     • After 20% discount: $100 - ($100 \times 0.20) = $80
     • Apply 10% discount to $80: $80 - ($80 \times 0.10) = $72

Markup pricing strategies

• Markup amount added to item cost to determine selling price
  • Formula: $\text{Selling Price} = \text{Cost} + (\text{Cost} \times \text{Markup Rate})$
  • Example: Item costs store $50, 40% markup, selling price is $50 + ($50 \times 0.40) = $70
• Markup rates ensure profitability and cover business expenses
  • Factors influencing markup rates:
    • Cost of goods (wholesale prices, shipping fees)
    • Overhead expenses (rent, utilities, employee wages)
    • Desired profit margin (breakeven point, industry standards)

Profit and Revenue Analysis

• Revenue: Total income generated from sales before expenses are deducted
• Gross profit: Difference between revenue and cost of goods sold
• Net profit: Remaining profit after all expenses are deducted from gross profit
• Profit margin: Percentage of revenue that becomes profit
• Break-even point: Sales volume where total costs equal total revenue, resulting in zero profit or loss