1. + Discounts & Commissions Maintaining a profit while reducing job cost

2. Learning Goals After completing the activities in this slideshow lecture you should be able to… 1. Explain the difference between a discount and a commission and how they affect job profits 2. Calculate discounts 3. Calculate basic commissions

3. What is a Discount? To discount something means to offer it at a sale rate or to sell it at a reduced price. A discount is a number or percentage taken off the overall price of an item or job. If a printing company tells their client they are willing to offer a 10% discount on all jobs over $50,000 it is assumed that the 10% is to be taken directly off the $50,000.

4. Calculating Discounts Option 1: Flat Rate Discounts A flat rate discount is a certain value that is taken off the overall cost of an item or job. Jones Printing Company is offering a $500 discount for all new customers. Every job produced for a new customer will be reduced by exactly $500. Job Cost – Flat Rate Discount = Total Cost to the Customer This value is variable. It will change depending on the discount being offered. It is $500 in this case because Jones Printing Company is offering a $500 discount for all new customers.

5. Calculating Discounts Option 1: Flat Rate Discounts (EXAMPLE) Maryanne has decided to send a pocket folder printing job to Jones Printing Company (JPC). She has never worked with JPC before. She has received a price quote for $11,600 to print 31,500 pocket folders. JPC is offering a flat rate discount of $500 for all new customers. How much will this job cost after the discount? Job Cost – Flat Rate Discount = Total Cost to the Customer $11,600 - $500 = $11,100 (Total cost to Maryanne)

6. Calculating Discounts Option 1: Flat Rate Discounts (PRACTICE) Joshua Moiré can’t decide whether to send his book to Smith Printing Company (SPC) or Jones Printing Company (JPC). SPC will charge him $27,345 to print and bind 71,000 books. JPC wants to charge him $28,150 but is offering a $500 discount for all new customers. Joshua has never worked with JPC before so he can take advantage of the discount. Where should Joshua send his books to be printed and bound if he wants to pay the lowest price? How much will he pay? Do not more on to the next slide until you have attempted this problem.

7. Calculating Discounts Option 1: Flat Rate Discounts (ANSWER) Joshua Moiré can’t decide whether to send his book to Smith Printing Company (SPC) or Jones Printing Company (JPC). SPC will charge him $27,345 to print and bind 71,000 books. JPC wants to charge him $28,150 but is offering a $500 discount for all new customers. Joshua has never worked with JPC before so he can take advantage of the discount. Where should Joshua send his books to be printed and bound if he wants to pay the lowest price? How much will he pay? Smith Printing Company: $27,345 Jones Printing Company: $28,150 - $500= $27,650 Joshua should send his job to Smith Printing Company. They are cheaper even after the discount that Jones Printing Company is offering.

8. Calculating Discounts Option 2: Variable Rate Discounts A variable rate discount is a percentage that is taken off the overall cost of an item or job. Jones Printing Company is offering a 10% discount for all new customers. Every job produced for a new customer will be reduced by exactly 10% of the job cost. This price is variable because 10% off a $10,000 job is going to be a smaller discount than a 10% discount off a $250,000 job. Job Cost – Discount % = Total Cost to the Customer A percentage is a variable. We must first calculate the percentage before we can finish this equation.

9. Calculating Discounts Option 2: Variable Rate Discounts (EXAMPLE) Maryanne has decided to send a pocket folder printing job to Jones Printing Company (JPC). She has never worked with JPC before. She has received a price quote for $11,600 to print 31,500 pocket folders. JPC is offering a variable rate discount of 10% for all new customers. How much will this job cost after the discount? 1. Calculate the percentage (%) 2. Complete discount the equation …What is 10% (discount) of $11,600 (job cost)? …Job Cost – Discount % = Total Cost to the Customer

10. Calculating Discounts Option 2: Variable Rate Discounts (EXAMPLE) STEP 1: Find the value of the percentage What is 10% (discount) of $11,600 (job cost)? 10% of $11,600 =.10 x $11,600 = $1,160 STEP 2: Finish the equation Job Cost – Discount % = Total Cost to the Customer $11,600 - $1,160 = $10,440 Total cost of the job after the 10% discount. a.Divide any percentage by 100 to convert it to a decimal b.‘of’ in mathematics can be rewritten as multiplication

11. Calculating Discounts Option 2: Variable Rate Discounts (PRACTICE) Joshua Moiré can’t decide whether to send his book to Smith Printing Company (SPC) or Jones Printing Company (JPC). SPC will charge him $27,345 to print and bind 71,000 books. JPC wants to charge him $28,150 but is offering a 10% discount for all new customers. Joshua has never worked with JPC before so he can take advantage of the discount. Where should Joshua send his books to be printed and bound if he wants to pay the lowest price? How much will he pay? Do not more on to the next slide until you have attempted this problem.

12. Calculating Discounts Smith Printing Company: $27,345 Jones Printing Company: $28,150 – 10%= $25,335 Joshua should send his job to Jones Printing Company. They are cheaper after the discount. Option 2: Variable Rate Discounts (ANSWER) STEP 1: Find the value of the percentage What is 10% (discount) of $28,150 (job cost)? 10% of $28,150 =.10 x $28,150 = $2,815 STEP 2: Finish the equation Job Cost – Discount % = Total Cost to the Customer $28,150 - $2,815 = $25,335 Total cost of the job at JPC after the 10% discount. a.Divide any percentage by 100 to convert it to a decimal b.‘of’ in mathematics can be rewritten as multiplication

13. What is a Commission? A commission is a remuneration for services rendered or products sold. Printing and graphics salesmen traditionally work on a commission basis. This means their salary is earned through the percentages they receive for the jobs they bring in. If Ed Parker sells 600 jobs in a year with a total value of $1,345,000 he will receive a certain percentage of the total sale cost. That percentage can be negotiated by the salesman when he/she is hired. Let’s assume Ed’s commission is 7%. 7% of $1,345,000 = $94,150 (Ed’s salary for that year)

14. Calculating Commissions STEP 1: Identify the total amount of goods/services sold by the salesman. STEP 2: Identify the commission rate (%) STEP 3: Complete the equation (What is commission [%] of Total Sales [$]?)

15. Calculating Commissions Calculating Commissions (EXAMPLE): Ed Parker sold $3,500,000 worth of printing for Jones Printing Company (JPC) in 2009. His commission was 5% that year. How much money did Ed make in 2009? STEP 1: $3,500,000 STEP 2: 5% STEP 3: What is 5% of $3,500,000 5% of $3,500,000 =.05 x $3,500,000 = $175,000 a.Divide any percentage by 100 to convert it to a decimal b.‘of’ in mathematics can be rewritten as multiplication

16. Calculating Commissions Calculating Commissions (PRACTICE): Ed Parker decided to renegotiate his commission rate after 2009. Jones Printing agreed to pay him 7.25% commission for all of his sales in 2010. Ed only sold $3,000,000 that year. How much money did Ed make in 2010? Do not more on to the next slide until you have attempted this problem.

17. Calculating Commissions Calculating Commissions (PRACTICE): Ed Parker decided to renegotiate his commission rate after 2009. Jones Printing agreed to pay him 7.25% commission for all of his sales in 2010. Ed only sold $3,000,000 that year. How much money did Ed make in 2010? STEP 1: $3,000,000 STEP 2: 7.25% STEP 3: What is 7.25% of $3,500,000 7.25% of $3,000,000 =.0725 x $3,000,000 = $217,500 a.Divide any percentage by 100 to convert it to a decimal b.‘of’ in mathematics can be rewritten as multiplication

18. + What’s Next? HW: Discounts & Commissions Q: Discounts & Commissions