How To Calculate a Discount Using 2 Methods (With Examples)

By Indeed Editorial Team

Updated September 6, 2022 | Published April 14, 2020

Updated September 6, 2022

Published April 14, 2020

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Companies offer discounts to customers, sometimes in an attempt to attract a new customer demographic or to increase customer demand for a certain product or service. Whatever the reason for offering a discount, businesses must make sure they can either break even or make a profit at a lower price. For some companies, a small initial loss in revenue can be worth the increased customer base.

In this article, we look at the two primary methods of calculating a discount, and provide a step-by-step guide for each along with examples to help you understand the concepts.

Key takeaways:

  • There are two main ways to calculate a discount. The first calculates the discount price exactly, while the other provides a rough estimate.

  • The first method can help with activities such as sales forecasts, providing an accurate picture of a business' earning potential.

  • The second method may be useful for establishing an approximate idea of the profitability of a business even with discounted prices.

How to calculate a discount as a percentage of the original price

Calculating a discount as a percentage of the original price is a straightforward process. The resulting figure is exact down to the penny, so you can determine your revenue potential and make accurate sales forecasts. Follow these steps:

1. Convert the percentage to a decimal

The first step is to represent the discount percentage in decimal form. Calculators have a function for this, but you can also do it manually. The conversion is as simple as moving the decimal point two places to the left. Consider, for instance, a 5% discount. The number 5 has an implied decimal point after it. Moving the point two places leftward would give you 0.05, which is the percentage in decimal form. 

Example: Shoe Mart wants to offer a 25% discount on winter boots. Moving the decimal point of 25 two spaces to the left results in the figure 0.25.

Related: How To Calculate Percentages in 3 Easy Steps (With Examples)

2. Multiply the original price by the decimal

The next step is to perform a basic mathematical operation to determine how much the discount is in terms of dollar figures. To do so, take the original price of the item and then multiply it by the decimal determined in step one.

Example: Winter boots at Shoe Mart originally sold for $147. To determine the discount value, a sales professional multiplies that price by a discount of 0.25. The product of $147 and 0.25 is $36.75. Therefore, the boots have been discounted by $36.75.

Related: Rules of Multiplication: Definition and Examples

3. Subtract the discount from the original price

The final step is a matter of subtraction. Take the discounted dollar amount you calculated in step two and subtract it from the original price. The resulting difference is the final discounted price of the product. 

Example: Since the discount value for Shoe Mart's winter boots is $36.75, the company can subtract that figure from the original price of $147. The resulting difference is $110.25, which is how much Shoe Mart earns per sale of the boots.

Related: Basic Math Skills: Definitions, Examples and How To Improve Them

How to calculate a discount through estimation

Sometimes, it's not practical or efficient to calculate a discount to the exact penny. Perhaps you'd just like to get a rough sense of whether you can discount prices while remaining profitable. In such instances, it's useful to know how to calculate a discount through estimation. Follow these steps to learn how:

1. Round the original price

Rounding a number is the act of raising or lowering it to the nearest specified numeric place. In this case, round it to the nearest ten. Keep in mind that the general rule for rounding is to round up if the number is at or above the halfway point, and to round down if it's below. Thus, a figure of 35 would round up to 40, while 34 would round down to 30. 

Example: The original price of winter boots at Shoe Mart was $147. Here, the company can round up to the nearest tens place, which is $150.

Related: How To Round Decimals: A Complete Guide With Examples

2. Find 10% of the rounded number

Determining 10% of the rounded number further simplifies it so you have a figure that's easily calculable in your head. To do so, move the decimal point one place to the left.

Example: A sales professional finds that the rounded price of the winter boots is $150.00. If they move the decimal point one place to the left, they can determine that 10% of $150 is $15.

Related: Math Skills: Definitions, Examples, and How To Improve Them

3. Determine "10s"

Figure out how many 10s are in the discount. Don't worry about any 5s at this point.

Example: There are two 10s in 25%. They know this because 10 times 2 equals 20. A third 10 would equal 30, which would exceed the value of 25. 

4. Estimate the discount

Use the number of 10s determined in step three with the 10% dollar amount from step two to estimate the discount. Multiply these figures together.

Example: The rounded price of the winter boots is $150. Of that, 10% is $15. The discount is 25%, and there are two 10s in the number 25. Multiplying the 10% amount by 2 results in a product of $30.

5. Account for 5%

Some discounts may have a 5 in the hundreds place. If this is the case, find the dollar amount for the remaining 5% by dividing the dollar amount for 10% by 2.

Example: The Shoe Mart discount on winter boots is 25%, and 10% of the original rounded price of $150 is $15. To account for the remaining 5%, they divide $15 by 2 for a quotient of $7.50. Therefore, 5% of $150 is $7.50.

Related: 12 Helpful Rules of Division (With Examples)

6. Add the 5%

Next, to determine the final discount value, take the 5% dollar amount and add it to the initial estimated discount. That is, combine the figures you've calculated in steps four and five.

Example: In step four, they found that 20% of $150 is $30. In step five, they found that 5% of $150 is $7.50. Adding the percentage values together gives us a total discount of $37.50.

Related: How To Add Percentages Together and Percentage Uses

7. Calculate the sale price

Finally, take the final discount you calculated in step six and subtract it from the rounded original price. This is your estimated discounted price.

Example: The winter boots at Shoe Mart were rounded from $147 to $150. The total estimated discount amounted to $37.50. Subtracting $37.50 from $150 results in a difference of $112.50. The estimated sale price of the winter boots is $112.50.

2 more examples of how to calculate a discount

Here are two additional examples showing you how to find the discounted price of a product:

Example 1

The following example shows you how to calculate an exact discount as a percentage of the original price:

Abbott's Clothiers intends to have a season's end sale on winter sweaters. The original price of the sweaters is $80. The store would like to discount the sweaters by 15%. 

To calculate the discount, the business converts 15% into the decimal 0.15. Then it multiplies 0.15 by the original price of $80, resulting in a figure of $12. This is the discounted amount. Finally, the company subtracts $12 from the original sweater price of $80. With the 15% discount, the sweaters cost $68.

Related: 12 Common Types of Discounts

Example 2

This example demonstrates how to calculate a discount through estimation:

Forever Jewelers wants to run a promotion for its customers. It's offering a 15% discount on wedding bands with the purchase of a full-price engagement ring. The wedding bands vary in cost, so the store uses the price of its most popular wedding band — $1,245 — as a baseline to estimate the discounted price. To calculate the estimated discount, a sales manager follows these steps:

  1. Round the original baseline price to the nearest 10. In this case, $1,245 rounds up to $1,250. 

  2. Find 10% of $1,250, which is $125. 

  3. Consider that only one 10 goes into the discount percentage of 15. Multiplying 1 by $125 results in an initial estimated discount of $125. 

  4. To account for the 5% in the discount value, divide $125 by 2 for a quotient of $62.50.

  5. Add $62.50 to the initial estimated discount of $125. The sum is $187.50.

  6. Subtract $187.50 from the original baseline price of $1,250. The difference is $1,062.50. That's the estimated discount price.

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