What this calculator does
A discount is easy to calculate but easy to misjudge. Removing 20% from a price cuts profit by far more than 20%, because the cost of the item does not change.
This calculator gives the discount amount, the final price and the percentage saved, so a promotion can be checked against the margin it leaves behind.
How the calculation works
The discount percentage is applied to the original price to produce the discount amount. Subtracting that from the original price gives the final price.
The percentage saved is the same as the discount rate when it is measured against the original price, which is the convention used in retail.
Worked example: 15% off a 200 item
- 1Original price: 200.00
- 2Discount: 200.00 × 15% = 30.00
- 3Final price: 200.00 − 30.00 = 170.00
The customer saves 30.00 and pays 170.00, a 15% saving.
Common mistakes
- Assuming a 20% discount only reduces profit by 20%. If the margin was 30%, a 20% discount can wipe out two-thirds of it.
- Stacking discounts by adding the percentages: 20% then 10% is not 30% off.
- Applying a discount to a price that already includes tax, then calculating tax again.
- Advertising a percentage saving that is measured against a price the item never actually sold at.