A vendor's price reduction is a discount when it is applied to net price.

A vendor's price reduction is a discount when it is applied to net price.

• A. Applied to shipping
• B. Applied to net price
• C. Applied to tax
• D. Applied to list price

Answer: (B)

A discount is a reduction in the amount owed for goods. When a vendor’s price reduction is applied to the net price, it lowers the actual price you pay for the merchandise after any other adjustments but before taxes and freight, which is exactly what a discount does. If the same reduction were applied to shipping, it would only reduce the freight charge, not the price of the goods themselves. If it were applied to tax, it would reduce the tax amount, not the goods' price. If it were applied to the list price, it would change the quoted starting price rather than reduce the net amount due on the goods. So applying the price reduction to net price best represents a discount.

A discount is a reduction in the amount owed for goods. When a vendor’s price reduction is applied to the net price, it lowers the actual price you pay for the merchandise after any other adjustments but before taxes and freight, which is exactly what a discount does. If the same reduction were applied to shipping, it would only reduce the freight charge, not the price of the goods themselves. If it were applied to tax, it would reduce the tax amount, not the goods' price. If it were applied to the list price, it would change the quoted starting price rather than reduce the net amount due on the goods. So applying the price reduction to net price best represents a discount.