Chain Formula Calculator for Accounting Firm

Chain Discount Formula:

\[ \text{Net Price} = \text{List Price} \times \prod_{i=1}^n (1 - d_i) \]

List Price:

Discount Rate 1 (d₁):

decimal

Discount Rate 2 (d₂):

decimal

Discount Rate 3 (d₃):

decimal

Net Price:

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1. What is the Chain Discount Formula?

The chain discount formula calculates the final net price after applying a series of successive discounts to a list price. This is commonly used in trade discounts where multiple discounts are applied sequentially.

2. How Does the Calculator Work?

The calculator uses the chain discount formula:

\[ \text{Net Price} = \text{List Price} \times (1 - d_1) \times (1 - d_2) \times \cdots \times (1 - d_n) \]

Where:

List Price — Original price before discounts ($)
d₁, d₂, ..., dₙ — Successive discount rates (in decimal form)

Explanation: Each discount is applied to the remaining price after previous discounts have been applied.

3. Importance of Chain Discount Calculation

Details: Accurate calculation of net price after multiple discounts is crucial for accounting, pricing strategies, and financial planning in businesses.

4. Using the Calculator

Tips: Enter the list price in dollars and discount rates as decimals (e.g., 0.1 for 10%). You can calculate with 1-3 discount rates.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between chain discount and single discount?
A: A chain discount applies multiple discounts sequentially, while a single discount applies one overall discount.

Q2: How do I convert percentage discounts to decimals?
A: Divide the percentage by 100 (e.g., 15% = 0.15, 7.5% = 0.075).

Q3: Does the order of discounts matter?
A: Mathematically, the order doesn't affect the final net price, but practically some discounts may need to be applied in specific sequences.

Q4: What's the equivalent single discount rate?
A: You can calculate it as: 1 - [(1 - d₁) × (1 - d₂) × ... × (1 - dₙ)]

Q5: Can I add more than 3 discount rates?
A: This calculator handles up to 3, but the formula can be extended to any number of discounts.