Future Business Leaders of America (FBLA) Business Calculations Practice Test

A chain discount is:

1. A. a discount for related items

2. B. a term used when a vendor offers a buyer more than one discount

3. C. a discount for a series of American made manufacturing processes

4. D. a discount for items made with American manufactured chains

The correct answer is: B. a term used when a vendor offers a buyer more than one discount

A chain discount refers to a pricing strategy in which a vendor offers multiple discounts to a buyer, typically applied consecutively to a product’s price. This method allows buyers to benefit from a cumulative reduction in the overall cost of their purchase. For example, if a vendor offers a 10% discount followed by an additional 5% on the already-discounted price, the buyer effectively saves more compared to receiving a single discount. In the context of business transactions, chain discounts are often used in bulk sales and to encourage larger purchases by providing financial incentives that are more appealing than a single discount rate. This practice is common in various industries, particularly in wholesale and retail settings, making it a fundamental concept in pricing strategies. The other options do not accurately define a chain discount. A discount for related items would not encompass the multiple layers of discounts that are characteristic of chain discounts. A discount for American-made manufacturing processes or for items made with American manufactured chains does not reflect the concept of multiple applied discounts and instead focuses on product origin or specific attributes.